Correlation Between BMO SP and IShares NASDAQ
Can any of the company-specific risk be diversified away by investing in both BMO SP and IShares 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 IShares 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 iShares NASDAQ 100, you can compare the effects of market volatilities on BMO SP and IShares 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 IShares NASDAQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SP and IShares NASDAQ.
Diversification Opportunities for BMO SP and IShares NASDAQ
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BMO and IShares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding BMO SP 500 and iShares NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares NASDAQ 100 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 IShares NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares NASDAQ 100 has no effect on the direction of BMO SP i.e., BMO SP and IShares NASDAQ go up and down completely randomly.
Pair Corralation between BMO SP and IShares NASDAQ
Assuming the 90 days trading horizon BMO SP is expected to generate 1.38 times less return on investment than IShares NASDAQ. But when comparing it to its historical volatility, BMO SP 500 is 1.25 times less risky than IShares NASDAQ. It trades about 0.19 of its potential returns per unit of risk. iShares NASDAQ 100 is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 13,729 in iShares NASDAQ 100 on March 5, 2024 and sell it today you would earn a total of 332.00 from holding iShares NASDAQ 100 or generate 2.42% 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. iShares NASDAQ 100
Performance |
Timeline |
BMO SP 500 |
iShares NASDAQ 100 |
BMO SP and IShares NASDAQ Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BMO SP and IShares NASDAQ
The main advantage of trading using opposite BMO SP and IShares NASDAQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO SP position performs unexpectedly, IShares 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 IShares NASDAQ will offset losses from the drop in IShares NASDAQ's long position.BMO SP vs. Vanguard FTSE Developed | BMO SP vs. iShares Core Canadian | BMO SP vs. BMO Long Federal | BMO SP vs. Vanguard FTSE Canada |
IShares NASDAQ vs. Vanguard FTSE Developed | IShares NASDAQ vs. iShares Core Canadian | IShares NASDAQ vs. BMO Long Federal | IShares NASDAQ vs. Vanguard FTSE Canada |
Check out your portfolio center.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.
Other Complementary Tools
Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
Money Managers Screen money managers from public funds and ETFs managed around the world | |
CEOs Directory Screen CEOs from public companies around the world | |
Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance |