Correlation Between BMO SP and CIBC Qx

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

By analyzing existing cross correlation between BMO SP 500 and CIBC Qx Low, you can compare the effects of market volatilities on BMO SP and CIBC Qx 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 SP with a short position of CIBC Qx. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SP and CIBC Qx.

Diversification Opportunities for BMO SP and CIBC Qx

-0.37

Correlation Coefficient

BMO SP  CIBC Qx

Very good diversification

The 3 months correlation between BMO and CIBC is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding BMO SP 500 and CIBC Qx Low in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIBC Qx Low and BMO SP 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 SP 500 are associated (or correlated) with CIBC Qx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIBC Qx Low has no effect on the direction of BMO SP i.e., BMO SP and CIBC Qx go up and down completely randomly.

Pair Corralation between BMO SP and CIBC Qx

Assuming the 90 days trading horizon BMO SP 500 is expected to generate 0.38 times more return on investment than CIBC Qx. However, BMO SP 500 is 2.64 times less risky than CIBC Qx. It trades about -0.09 of its potential returns per unit of risk. CIBC Qx Low is currently generating about -0.07 per unit of risk. If you would invest  9,243  in BMO SP 500 on December 29, 2024 and sell it today you would lose (516.00) from holding BMO SP 500 or give up 5.58% of portfolio value over 90 days.

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

BMO SP 500  vs.  CIBC Qx Low

BMO SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days BMO SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, BMO SP is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

CIBC Qx Low

Risk-Adjusted Performance

Very Weak

Over the last 90 days CIBC Qx Low has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with BMO SP and CIBC Qx

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

The idea behind BMO SP 500 and CIBC Qx Low 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..