Correlation Between BMO SP and Hamilton Equity

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

Diversification Opportunities for BMO SP and Hamilton Equity

0.99

Correlation Coefficient

BMO SP  Hamilton Equity

No risk reduction

The 3 months correlation between BMO and Hamilton is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding BMO SP 500 and Hamilton Equity YIELD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hamilton Equity YIELD 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 Hamilton Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hamilton Equity YIELD has no effect on the direction of BMO SP i.e., BMO SP and Hamilton Equity go up and down completely randomly.

Pair Corralation between BMO SP and Hamilton Equity

Assuming the 90 days trading horizon BMO SP 500 is expected to generate 0.95 times more return on investment than Hamilton Equity. However, BMO SP 500 is 1.05 times less risky than Hamilton Equity. It trades about 0.16 of its potential returns per unit of risk. Hamilton Equity YIELD is currently generating about 0.15 per unit of risk. If you would invest  8,822  in BMO SP 500 on October 27, 2024 and sell it today you would earn a total of  749.00  from holding BMO SP 500 or generate 8.49% return on investment over 90 days.

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

BMO SP 500  vs.  Hamilton Equity YIELD

BMO SP 500

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BMO SP 500 are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO SP may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hamilton Equity YIELD

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hamilton Equity YIELD are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Hamilton Equity may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with BMO SP and Hamilton Equity

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

The idea behind BMO SP 500 and Hamilton Equity YIELD 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.