Correlation Between BMO SPTSX and Harvest Bank

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

By analyzing existing cross correlation between BMO SPTSX Equal and Harvest Bank Leaders, you can compare the effects of market volatilities on BMO SPTSX and Harvest Bank 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 Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SPTSX and Harvest Bank.

Diversification Opportunities for BMO SPTSX and Harvest Bank

0.9

Correlation Coefficient

BMO SPTSX  Harvest Bank

Almost no diversification

The 3 months correlation between BMO and Harvest is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding BMO SPTSX Equal and Harvest Bank Leaders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harvest Bank Leaders 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 Equal are associated (or correlated) with Harvest Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harvest Bank Leaders has no effect on the direction of BMO SPTSX i.e., BMO SPTSX and Harvest Bank go up and down completely randomly.

Pair Corralation between BMO SPTSX and Harvest Bank

Assuming the 90 days trading horizon BMO SPTSX Equal is expected to generate 0.51 times more return on investment than Harvest Bank. However, BMO SPTSX Equal is 1.95 times less risky than Harvest Bank. It trades about -0.1 of its potential returns per unit of risk. Harvest Bank Leaders is currently generating about -0.06 per unit of risk. If you would invest  4,184  in BMO SPTSX Equal on December 29, 2024 and sell it today you would lose (190.00) from holding BMO SPTSX Equal or give up 4.54% of portfolio value over 90 days.

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

BMO SPTSX Equal  vs.  Harvest Bank Leaders

BMO SPTSX Equal

Risk-Adjusted Performance

Very Weak

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

Harvest Bank Leaders

Risk-Adjusted Performance

Very Weak

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

Pair Trading with BMO SPTSX and Harvest Bank

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

The idea behind BMO SPTSX Equal and Harvest Bank Leaders 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.