Correlation Between BMO SPTSX and Harvest Nvidia

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

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

Diversification Opportunities for BMO SPTSX and Harvest Nvidia

0.82

Correlation Coefficient

BMO SPTSX  Harvest Nvidia

Very poor diversification

The 3 months correlation between BMO and Harvest is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding BMO SPTSX Capped and Harvest Nvidia Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harvest Nvidia Enhanced and BMO 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 BMO SPTSX Capped are associated (or correlated) with Harvest Nvidia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harvest Nvidia Enhanced has no effect on the direction of BMO SPTSX i.e., BMO SPTSX and Harvest Nvidia go up and down completely randomly.

Pair Corralation between BMO SPTSX and Harvest Nvidia

Assuming the 90 days trading horizon BMO SPTSX is expected to generate 2.13 times less return on investment than Harvest Nvidia. But when comparing it to its historical volatility, BMO SPTSX Capped is 5.44 times less risky than Harvest Nvidia. It trades about 0.33 of its potential returns per unit of risk. Harvest Nvidia Enhanced is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,020  in Harvest Nvidia Enhanced on September 13, 2024 and sell it today you would earn a total of  196.00  from holding Harvest Nvidia Enhanced or generate 19.22% return on investment over 90 days.

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

BMO SPTSX Capped  vs.  Harvest Nvidia Enhanced

BMO SPTSX Capped

Risk-Adjusted Performance

25 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in BMO SPTSX Capped are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO SPTSX may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Harvest Nvidia Enhanced

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Harvest Nvidia Enhanced are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical indicators, Harvest Nvidia sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BMO SPTSX and Harvest Nvidia

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

The idea behind BMO SPTSX Capped and Harvest Nvidia Enhanced 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.