Correlation Between First Asset and BMO SPTSX

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

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

Diversification Opportunities for First Asset and BMO SPTSX

0.99

Correlation Coefficient

First Asset  BMO SPTSX

No risk reduction

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

Pair Corralation between First Asset and BMO SPTSX

Assuming the 90 days trading horizon First Asset Morningstar is expected to generate 1.1 times more return on investment than BMO SPTSX. However, First Asset is 1.1 times more volatile than BMO SPTSX Capped. It trades about 0.1 of its potential returns per unit of risk. BMO SPTSX Capped is currently generating about 0.1 per unit of risk. If you would invest  2,392  in First Asset Morningstar on April 24, 2025 and sell it today you would earn a total of  1,294  from holding First Asset Morningstar or generate 54.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

First Asset Morningstar  vs.  BMO SPTSX Capped

First Asset Morningstar

Risk-Adjusted Performance

Very Strong

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

BMO SPTSX Capped

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in BMO SPTSX Capped are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO SPTSX may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with First Asset and BMO SPTSX

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

The idea behind First Asset Morningstar and BMO SPTSX Capped 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.