Correlation Between IShares SPTSX and BMO Canadian

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

By analyzing existing cross correlation between iShares SPTSX Composite and BMO Canadian Dividend, you can compare the effects of market volatilities on IShares SPTSX and BMO Canadian 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 IShares SPTSX with a short position of BMO Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SPTSX and BMO Canadian.

Diversification Opportunities for IShares SPTSX and BMO Canadian

1.0

Correlation Coefficient

IShares SPTSX  BMO Canadian

No risk reduction

The 3 months correlation between IShares and BMO is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX Composite and BMO Canadian Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Canadian Dividend and IShares 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 iShares SPTSX Composite are associated (or correlated) with BMO Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Canadian Dividend has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and BMO Canadian go up and down completely randomly.

Pair Corralation between IShares SPTSX and BMO Canadian

Assuming the 90 days trading horizon iShares SPTSX Composite is expected to generate 0.99 times more return on investment than BMO Canadian. However, iShares SPTSX Composite is 1.01 times less risky than BMO Canadian. It trades about 0.4 of its potential returns per unit of risk. BMO Canadian Dividend is currently generating about 0.32 per unit of risk. If you would invest  2,676  in iShares SPTSX Composite on May 7, 2025 and sell it today you would earn a total of  214.00  from holding iShares SPTSX Composite or generate 8.0% return on investment over 90 days.

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

iShares SPTSX Composite  vs.  BMO Canadian Dividend

iShares SPTSX Composite

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SPTSX Composite are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, IShares SPTSX may actually be approaching a critical reversion point that can send shares even higher in September 2025.

BMO Canadian Dividend

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Canadian Dividend are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO Canadian may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with IShares SPTSX and BMO Canadian

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

The idea behind iShares SPTSX Composite and BMO Canadian Dividend 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.