Correlation Between BMO SPTSX and CI WisdomTree

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

By analyzing existing cross correlation between BMO SPTSX Capped and CI WisdomTree Quality, you can compare the effects of market volatilities on BMO SPTSX and CI WisdomTree 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 CI WisdomTree. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SPTSX and CI WisdomTree.

Diversification Opportunities for BMO SPTSX and CI WisdomTree

0.85

Correlation Coefficient

BMO SPTSX  CI WisdomTree

Very poor diversification

The 3 months correlation between BMO and DGR-B is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding BMO SPTSX Capped and CI WisdomTree Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI WisdomTree Quality 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 Capped are associated (or correlated) with CI WisdomTree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI WisdomTree Quality has no effect on the direction of BMO SPTSX i.e., BMO SPTSX and CI WisdomTree go up and down completely randomly.

Pair Corralation between BMO SPTSX and CI WisdomTree

Assuming the 90 days trading horizon BMO SPTSX Capped is expected to generate 0.99 times more return on investment than CI WisdomTree. However, BMO SPTSX Capped is 1.01 times less risky than CI WisdomTree. It trades about -0.15 of its potential returns per unit of risk. CI WisdomTree Quality is currently generating about -0.16 per unit of risk. If you would invest  2,966  in BMO SPTSX Capped on February 1, 2024 and sell it today you would lose (55.00) from holding BMO SPTSX Capped or give up 1.85% of portfolio value over 90 days.

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

BMO SPTSX Capped  vs.  CI WisdomTree Quality

BMO SPTSX Capped

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BMO SPTSX Capped are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, BMO SPTSX is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

CI WisdomTree Quality

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CI WisdomTree Quality are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, CI WisdomTree is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BMO SPTSX and CI WisdomTree

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

The idea behind BMO SPTSX Capped and CI WisdomTree Quality 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.