Correlation Between IShares SPTSX and BMO Tactical

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

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

Diversification Opportunities for IShares SPTSX and BMO Tactical

-0.23

Correlation Coefficient

IShares SPTSX  BMO Tactical

Very good diversification

The 3 months correlation between IShares and BMO is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX Capped and BMO Tactical Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Tactical Dividend and IShares 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 iShares SPTSX Capped are associated (or correlated) with BMO Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Tactical Dividend has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and BMO Tactical go up and down completely randomly.

Pair Corralation between IShares SPTSX and BMO Tactical

Assuming the 90 days trading horizon iShares SPTSX Capped is expected to under-perform the BMO Tactical. In addition to that, IShares SPTSX is 3.76 times more volatile than BMO Tactical Dividend. It trades about -0.06 of its total potential returns per unit of risk. BMO Tactical Dividend is currently generating about 0.13 per unit of volatility. If you would invest  2,770  in BMO Tactical Dividend on December 29, 2024 and sell it today you would earn a total of  111.00  from holding BMO Tactical Dividend or generate 4.01% return on investment over 90 days.

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

iShares SPTSX Capped  vs.  BMO Tactical Dividend

iShares SPTSX Capped

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares SPTSX Capped 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.

BMO Tactical Dividend

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Tactical Dividend are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, BMO Tactical is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares SPTSX and BMO Tactical

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

The idea behind iShares SPTSX Capped and BMO Tactical Dividend 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.

Check out your portfolio center.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.