Correlation Between Financial and BMO SPTSX

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

By analyzing existing cross correlation between Financial 15 Split and BMO SPTSX Equal, you can compare the effects of market volatilities on Financial 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 Financial with a short position of BMO SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and BMO SPTSX.

Diversification Opportunities for Financial and BMO SPTSX

-0.89

Correlation Coefficient

Financial  BMO SPTSX

Pay attention - limited upside

The 3 months correlation between Financial and BMO is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split 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 Financial 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 Financial 15 Split 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 Financial i.e., Financial and BMO SPTSX go up and down completely randomly.

Pair Corralation between Financial and BMO SPTSX

Assuming the 90 days trading horizon Financial 15 Split is expected to generate 0.36 times more return on investment than BMO SPTSX. However, Financial 15 Split is 2.8 times less risky than BMO SPTSX. It trades about 0.37 of its potential returns per unit of risk. BMO SPTSX Equal is currently generating about -0.2 per unit of risk. If you would invest  1,040  in Financial 15 Split on December 1, 2024 and sell it today you would earn a total of  70.00  from holding Financial 15 Split or generate 6.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Financial 15 Split  vs.  BMO SPTSX Equal

Financial 15 Split

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Financial 15 Split are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

BMO SPTSX Equal

Risk-Adjusted Performance

Very Weak

Over the last 90 days BMO SPTSX Equal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with Financial and BMO SPTSX

The main advantage of trading using opposite Financial and BMO SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial 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.

The idea behind Financial 15 Split and BMO SPTSX Equal 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.