Correlation Between Bank of Montreal and SPDR Portfolio

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

By analyzing existing cross correlation between Bank of Montreal and SPDR Portfolio MSCI, you can compare the effects of market volatilities on Bank of Montreal and SPDR Portfolio 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 Bank of Montreal with a short position of SPDR Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Montreal and SPDR Portfolio.

Diversification Opportunities for Bank of Montreal and SPDR Portfolio

0.44

Correlation Coefficient

Bank of Montreal  SPDR Portfolio

Very weak diversification

The 3 months correlation between Bank and SPDR is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Montreal and SPDR Portfolio MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio MSCI and Bank of Montreal 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 Bank of Montreal are associated (or correlated) with SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio MSCI has no effect on the direction of Bank of Montreal i.e., Bank of Montreal and SPDR Portfolio go up and down completely randomly.

Pair Corralation between Bank of Montreal and SPDR Portfolio

Given the investment horizon of 90 days Bank of Montreal is expected to under-perform the SPDR Portfolio. In addition to that, Bank of Montreal is 5.54 times more volatile than SPDR Portfolio MSCI. It trades about -0.04 of its total potential returns per unit of risk. SPDR Portfolio MSCI is currently generating about -0.01 per unit of volatility. If you would invest  6,469  in SPDR Portfolio MSCI on December 26, 2024 and sell it today you would lose (46.00) from holding SPDR Portfolio MSCI or give up 0.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	40.0%
Values	Daily Returns

Bank of Montreal  vs.  SPDR Portfolio MSCI

Bank of Montreal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank of Montreal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

SPDR Portfolio MSCI

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Bank of Montreal and SPDR Portfolio

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

The idea behind Bank of Montreal and SPDR Portfolio MSCI 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.