Correlation Between BMO SP and Bitcoin ETF

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

Diversification Opportunities for BMO SP and Bitcoin ETF

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between BMO and Bitcoin is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding BMO SP 500 and Bitcoin ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitcoin ETF 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 Bitcoin ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bitcoin ETF has no effect on the direction of BMO SP i.e., BMO SP and Bitcoin ETF go up and down completely randomly.

Pair Corralation between BMO SP and Bitcoin ETF

Assuming the 90 days trading horizon BMO SP is expected to generate 2.03 times less return on investment than Bitcoin ETF. But when comparing it to its historical volatility, BMO SP 500 is 2.42 times less risky than Bitcoin ETF. It trades about 0.24 of its potential returns per unit of risk. Bitcoin ETF is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  3,314  in Bitcoin ETF on April 24, 2025 and sell it today you would earn a total of  848.00  from holding Bitcoin ETF or generate 25.59% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy93.55%
ValuesDaily Returns

BMO SP 500  vs.  Bitcoin ETF

 Performance 
       Timeline  
BMO SP 500 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in BMO SP 500 are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO SP displayed solid returns over the last few months and may actually be approaching a breakup point.
Bitcoin ETF 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin ETF are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating forward indicators, Bitcoin ETF sustained solid returns over the last few months and may actually be approaching a breakup point.

BMO SP and Bitcoin ETF Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BMO SP and Bitcoin ETF

The main advantage of trading using opposite BMO SP and Bitcoin ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO SP position performs unexpectedly, Bitcoin ETF 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 Bitcoin ETF will offset losses from the drop in Bitcoin ETF's long position.
The idea behind BMO SP 500 and Bitcoin ETF 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.
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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