Correlation Between First Trust and BMO SPTSX
Can any of the company-specific risk be diversified away by investing in both First Trust and BMO SPTSX 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 First Trust and BMO SPTSX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust AlphaDEX and BMO SPTSX Equal, you can compare the effects of market volatilities on First Trust and BMO SPTSX 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 First Trust with a short position of BMO SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and BMO SPTSX.
Diversification Opportunities for First Trust and BMO SPTSX
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and BMO is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding First Trust AlphaDEX and BMO SPTSX Equal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO SPTSX Equal and First Trust 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 First Trust AlphaDEX are associated (or correlated) with BMO SPTSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO SPTSX Equal has no effect on the direction of First Trust i.e., First Trust and BMO SPTSX go up and down completely randomly.
Pair Corralation between First Trust and BMO SPTSX
Assuming the 90 days trading horizon First Trust AlphaDEX is expected to generate 1.02 times more return on investment than BMO SPTSX. However, First Trust is 1.02 times more volatile than BMO SPTSX Equal. It trades about -0.04 of its potential returns per unit of risk. BMO SPTSX Equal is currently generating about -0.12 per unit of risk. If you would invest 4,093 in First Trust AlphaDEX on December 28, 2024 and sell it today you would lose (107.00) from holding First Trust AlphaDEX or give up 2.61% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
First Trust AlphaDEX vs. BMO SPTSX Equal
Performance |
Timeline |
First Trust AlphaDEX |
BMO SPTSX Equal |
First Trust and BMO SPTSX Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Trust and BMO SPTSX
The main advantage of trading using opposite First Trust and BMO SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, BMO SPTSX 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 SPTSX will offset losses from the drop in BMO SPTSX's long position.First Trust vs. First Trust AlphaDEX | First Trust vs. FT AlphaDEX Industrials | First Trust vs. BMO Equal Weight | First Trust vs. iShares Global Healthcare |
BMO SPTSX vs. BMO Equal Weight | BMO SPTSX vs. BMO Equal Weight | BMO SPTSX vs. BMO Global Infrastructure | BMO SPTSX vs. BMO SPTSX Equal |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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