Correlation Between IShares SPTSX and BMO Corporate
Can any of the company-specific risk be diversified away by investing in both IShares SPTSX and BMO Corporate at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining IShares SPTSX and BMO Corporate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares SPTSX 60 and BMO Corporate Bond, you can compare the effects of market volatilities on IShares SPTSX and BMO Corporate and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in IShares SPTSX with a short position of BMO Corporate. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SPTSX and BMO Corporate.
Diversification Opportunities for IShares SPTSX and BMO Corporate
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and BMO is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX 60 and BMO Corporate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Corporate Bond and IShares SPTSX is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on iShares SPTSX 60 are associated (or correlated) with BMO Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Corporate Bond has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and BMO Corporate go up and down completely randomly.
Pair Corralation between IShares SPTSX and BMO Corporate
Assuming the 90 days trading horizon iShares SPTSX 60 is expected to generate 1.64 times more return on investment than BMO Corporate. However, IShares SPTSX is 1.64 times more volatile than BMO Corporate Bond. It trades about 0.32 of its potential returns per unit of risk. BMO Corporate Bond is currently generating about 0.1 per unit of risk. If you would invest 3,548 in iShares SPTSX 60 on September 13, 2024 and sell it today you would earn a total of 335.00 from holding iShares SPTSX 60 or generate 9.44% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
iShares SPTSX 60 vs. BMO Corporate Bond
Performance |
Timeline |
iShares SPTSX 60 |
BMO Corporate Bond |
IShares SPTSX and BMO Corporate Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IShares SPTSX and BMO Corporate
The main advantage of trading using opposite IShares SPTSX and BMO Corporate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SPTSX position performs unexpectedly, BMO Corporate can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in BMO Corporate will offset losses from the drop in BMO Corporate's long position.IShares SPTSX vs. iShares Core SP | IShares SPTSX vs. iShares Core SPTSX | IShares SPTSX vs. iShares SPTSX Capped | IShares SPTSX vs. iShares SPTSX Capped |
BMO Corporate vs. iShares SPTSX 60 | BMO Corporate vs. iShares Core SP | BMO Corporate vs. iShares Core SPTSX | BMO Corporate vs. BMO Aggregate Bond |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Valuation module to check real value of public entities based on technical and fundamental data.
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