Correlation Between BMO SPTSX and IShares Silver

Can any of the company-specific risk be diversified away by investing in both BMO SPTSX and IShares Silver 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 IShares Silver 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 iShares Silver Bullion, you can compare the effects of market volatilities on BMO SPTSX and IShares Silver 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 IShares Silver. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SPTSX and IShares Silver.

Diversification Opportunities for BMO SPTSX and IShares Silver

-0.03

Correlation Coefficient

BMO SPTSX  IShares Silver

Good diversification

The 3 months correlation between BMO and IShares is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding BMO SPTSX Capped and iShares Silver Bullion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Silver Bullion 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 IShares Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Silver Bullion has no effect on the direction of BMO SPTSX i.e., BMO SPTSX and IShares Silver go up and down completely randomly.

Pair Corralation between BMO SPTSX and IShares Silver

Assuming the 90 days trading horizon BMO SPTSX is expected to generate 11.24 times less return on investment than IShares Silver. But when comparing it to its historical volatility, BMO SPTSX Capped is 1.59 times less risky than IShares Silver. It trades about 0.03 of its potential returns per unit of risk. iShares Silver Bullion is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,596  in iShares Silver Bullion on December 30, 2024 and sell it today you would earn a total of  272.00  from holding iShares Silver Bullion or generate 17.04% return on investment over 90 days.

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

BMO SPTSX Capped  vs.  iShares Silver Bullion

BMO SPTSX Capped

Risk-Adjusted Performance

Weak

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

iShares Silver Bullion

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Silver Bullion are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, IShares Silver unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BMO SPTSX and IShares Silver

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

The idea behind BMO SPTSX Capped and iShares Silver Bullion 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.