Correlation Between BetaPro SP and BMO MSCI

Can any of the company-specific risk be diversified away by investing in both BetaPro SP 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 SP 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 SP 500 and BMO MSCI USA, you can compare the effects of market volatilities on BetaPro SP 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 SP with a short position of BMO MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaPro SP and BMO MSCI.

Diversification Opportunities for BetaPro SP and BMO MSCI

-0.89

Correlation Coefficient

BetaPro SP  BMO MSCI

Pay attention - limited upside

The 3 months correlation between BetaPro and BMO is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro SP 500 and BMO MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO MSCI USA and BetaPro SP 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 SP 500 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 USA has no effect on the direction of BetaPro SP i.e., BetaPro SP and BMO MSCI go up and down completely randomly.

Pair Corralation between BetaPro SP and BMO MSCI

Assuming the 90 days trading horizon BetaPro SP 500 is expected to generate 1.05 times more return on investment than BMO MSCI. However, BetaPro SP is 1.05 times more volatile than BMO MSCI USA. It trades about 0.12 of its potential returns per unit of risk. BMO MSCI USA is currently generating about 0.0 per unit of risk. If you would invest  1,070  in BetaPro SP 500 on October 9, 2024 and sell it today you would earn a total of  22.00  from holding BetaPro SP 500 or generate 2.06% return on investment over 90 days.

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

BetaPro SP 500  vs.  BMO MSCI USA

BetaPro SP 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BetaPro SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, BetaPro SP is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

BMO MSCI USA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BMO MSCI USA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO MSCI may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with BetaPro SP and BMO MSCI

The main advantage of trading using opposite BetaPro SP and BMO MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BetaPro SP 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 SP 500 and BMO MSCI USA 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 Commodity Directory module to find actively traded commodities issued by global exchanges.