Correlation Between BMO SP and Evolve NASDAQ

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

Diversification Opportunities for BMO SP and Evolve NASDAQ

0.82

Correlation Coefficient

BMO SP  Evolve NASDAQ

Very poor diversification

The 3 months correlation between BMO and Evolve is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding BMO SP 500 and Evolve NASDAQ Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolve NASDAQ Technology 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 Evolve NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolve NASDAQ Technology has no effect on the direction of BMO SP i.e., BMO SP and Evolve NASDAQ go up and down completely randomly.

Pair Corralation between BMO SP and Evolve NASDAQ

Assuming the 90 days trading horizon BMO SP 500 is expected to generate 0.58 times more return on investment than Evolve NASDAQ. However, BMO SP 500 is 1.72 times less risky than Evolve NASDAQ. It trades about -0.09 of its potential returns per unit of risk. Evolve NASDAQ Technology is currently generating about -0.14 per unit of risk. If you would invest  9,243  in BMO SP 500 on December 30, 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 Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

BMO SP 500  vs.  Evolve NASDAQ Technology

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.

Evolve NASDAQ Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Evolve NASDAQ Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Etf's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with BMO SP and Evolve NASDAQ

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

The idea behind BMO SP 500 and Evolve NASDAQ Technology 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 Transaction History module to view history of all your transactions and understand their impact on performance.