Correlation Between BMO SPTSX and Harvest Tech

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

Diversification Opportunities for BMO SPTSX and Harvest Tech

0.9

Correlation Coefficient

BMO SPTSX  Harvest Tech

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 Tech Achievers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harvest Tech Achievers 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 Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harvest Tech Achievers has no effect on the direction of BMO SPTSX i.e., BMO SPTSX and Harvest Tech go up and down completely randomly.

Pair Corralation between BMO SPTSX and Harvest Tech

Assuming the 90 days trading horizon BMO SPTSX is expected to generate 1.69 times less return on investment than Harvest Tech. But when comparing it to its historical volatility, BMO SPTSX Equal is 1.4 times less risky than Harvest Tech. It trades about 0.07 of its potential returns per unit of risk. Harvest Tech Achievers is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,373  in Harvest Tech Achievers on September 12, 2024 and sell it today you would earn a total of  554.00  from holding Harvest Tech Achievers or generate 40.35% return on investment 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 Tech Achievers

BMO SPTSX Equal

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO SPTSX Equal are ranked lower than 19 (%) 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 Tech Achievers

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Harvest Tech Achievers are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Harvest Tech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BMO SPTSX and Harvest Tech

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

The idea behind BMO SPTSX Equal and Harvest Tech Achievers 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.