Correlation Between BMO SPTSX and Manulife Multifactor

Can any of the company-specific risk be diversified away by investing in both BMO SPTSX and Manulife Multifactor 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 BMO SPTSX and Manulife Multifactor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BMO SPTSX Capped and Manulife Multifactor Canadian, you can compare the effects of market volatilities on BMO SPTSX and Manulife Multifactor 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 BMO SPTSX with a short position of Manulife Multifactor. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SPTSX and Manulife Multifactor.

Diversification Opportunities for BMO SPTSX and Manulife Multifactor

1.0

Correlation Coefficient

BMO SPTSX  Manulife Multifactor

No risk reduction

The 3 months correlation between BMO and Manulife is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding BMO SPTSX Capped and Manulife Multifactor Canadian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife Multifactor and BMO 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 BMO SPTSX Capped are associated (or correlated) with Manulife Multifactor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manulife Multifactor has no effect on the direction of BMO SPTSX i.e., BMO SPTSX and Manulife Multifactor go up and down completely randomly.

Pair Corralation between BMO SPTSX and Manulife Multifactor

Assuming the 90 days trading horizon BMO SPTSX Capped is expected to generate 0.89 times more return on investment than Manulife Multifactor. However, BMO SPTSX Capped is 1.13 times less risky than Manulife Multifactor. It trades about 0.37 of its potential returns per unit of risk. Manulife Multifactor Canadian is currently generating about 0.31 per unit of risk. If you would invest  3,070  in BMO SPTSX Capped on September 2, 2024 and sell it today you would earn a total of  374.00  from holding BMO SPTSX Capped or generate 12.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

BMO SPTSX Capped  vs.  Manulife Multifactor Canadian

BMO SPTSX Capped

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in BMO SPTSX Capped are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO SPTSX may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Manulife Multifactor

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Multifactor Canadian are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Manulife Multifactor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BMO SPTSX and Manulife Multifactor

The main advantage of trading using opposite BMO SPTSX and Manulife Multifactor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO SPTSX position performs unexpectedly, Manulife Multifactor 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 Manulife Multifactor will offset losses from the drop in Manulife Multifactor's long position.

The idea behind BMO SPTSX Capped and Manulife Multifactor Canadian pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.