Correlation Between Harvest Brand and BMO SPTSX

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

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

Diversification Opportunities for Harvest Brand and BMO SPTSX

0.52

Correlation Coefficient

Harvest Brand  BMO SPTSX

Very weak diversification

The 3 months correlation between Harvest and BMO is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Harvest Brand Leaders 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 Harvest Brand 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 Harvest Brand Leaders 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 Harvest Brand i.e., Harvest Brand and BMO SPTSX go up and down completely randomly.

Pair Corralation between Harvest Brand and BMO SPTSX

Assuming the 90 days trading horizon Harvest Brand Leaders is expected to generate 1.85 times more return on investment than BMO SPTSX. However, Harvest Brand is 1.85 times more volatile than BMO SPTSX Equal. It trades about -0.12 of its potential returns per unit of risk. BMO SPTSX Equal is currently generating about -0.25 per unit of risk. If you would invest  1,019  in Harvest Brand Leaders on October 9, 2024 and sell it today you would lose (17.00) from holding Harvest Brand Leaders or give up 1.67% of portfolio value over 90 days.

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

Harvest Brand Leaders  vs.  BMO SPTSX Equal

Harvest Brand Leaders

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harvest Brand Leaders has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Harvest Brand is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

BMO SPTSX Equal

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BMO SPTSX Equal are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, BMO SPTSX is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Harvest Brand and BMO SPTSX

The main advantage of trading using opposite Harvest Brand and BMO SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harvest Brand 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 Harvest Brand Leaders 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.