Correlation Between BetaPro SPTSX and BMO MSCI

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

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

Diversification Opportunities for BetaPro SPTSX and BMO MSCI

-0.75

Correlation Coefficient

BetaPro SPTSX  BMO MSCI

Pay attention - limited upside

The 3 months correlation between BetaPro and BMO is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro SPTSX Capped and BMO MSCI Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO MSCI Canada and BetaPro 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 BetaPro SPTSX Capped are associated (or correlated) with BMO MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO MSCI Canada has no effect on the direction of BetaPro SPTSX i.e., BetaPro SPTSX and BMO MSCI go up and down completely randomly.

Pair Corralation between BetaPro SPTSX and BMO MSCI

Assuming the 90 days trading horizon BetaPro SPTSX Capped is expected to under-perform the BMO MSCI. In addition to that, BetaPro SPTSX is 4.0 times more volatile than BMO MSCI Canada. It trades about -0.03 of its total potential returns per unit of risk. BMO MSCI Canada is currently generating about 0.03 per unit of volatility. If you would invest  2,927  in BMO MSCI Canada on December 21, 2024 and sell it today you would earn a total of  35.00  from holding BMO MSCI Canada or generate 1.2% return on investment over 90 days.

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

BetaPro SPTSX Capped  vs.  BMO MSCI Canada

BetaPro SPTSX Capped

Risk-Adjusted Performance

Very Weak

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

BMO MSCI Canada

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BMO MSCI Canada are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, BMO MSCI is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BetaPro SPTSX and BMO MSCI

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

The idea behind BetaPro SPTSX Capped and BMO MSCI Canada 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 Global Correlations module to find global opportunities by holding instruments from different markets.