Correlation Between BMO SPTSX and International Zeolite

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

Diversification Opportunities for BMO SPTSX and International Zeolite

0.83

Correlation Coefficient

BMO SPTSX  International Zeolite

Very poor diversification

The 3 months correlation between BMO and International is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding BMO SPTSX Equal and International Zeolite Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Zeolite 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 International Zeolite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Zeolite has no effect on the direction of BMO SPTSX i.e., BMO SPTSX and International Zeolite go up and down completely randomly.

Pair Corralation between BMO SPTSX and International Zeolite

Assuming the 90 days trading horizon BMO SPTSX Equal is expected to under-perform the International Zeolite. But the etf apears to be less risky and, when comparing its historical volatility, BMO SPTSX Equal is 12.01 times less risky than International Zeolite. The etf trades about -0.17 of its potential returns per unit of risk. The International Zeolite Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2.00  in International Zeolite Corp on December 30, 2024 and sell it today you would lose (0.50) from holding International Zeolite Corp or give up 25.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

BMO SPTSX Equal  vs.  International Zeolite Corp

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 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.

International Zeolite

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in International Zeolite Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, International Zeolite showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BMO SPTSX and International Zeolite

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

The idea behind BMO SPTSX Equal and International Zeolite Corp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.