Correlation Between BMO SP and Tech Innovators

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

Diversification Opportunities for BMO SP and Tech Innovators

0.78

Correlation Coefficient

BMO SP  Tech Innovators

Poor diversification

The 3 months correlation between BMO and Tech is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding BMO SP 500 and Tech Innovators Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tech Innovators Yield 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 Tech Innovators. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tech Innovators Yield has no effect on the direction of BMO SP i.e., BMO SP and Tech Innovators go up and down completely randomly.

Pair Corralation between BMO SP and Tech Innovators

Assuming the 90 days trading horizon BMO SP is expected to generate 1.78 times less return on investment than Tech Innovators. But when comparing it to its historical volatility, BMO SP 500 is 1.67 times less risky than Tech Innovators. It trades about 0.3 of its potential returns per unit of risk. Tech Innovators Yield is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  1,453  in Tech Innovators Yield on April 22, 2025 and sell it today you would earn a total of  496.00  from holding Tech Innovators Yield or generate 34.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

BMO SP 500  vs.  Tech Innovators Yield

BMO SP 500

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO SP 500 are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, BMO SP displayed solid returns over the last few months and may actually be approaching a breakup point.

Tech Innovators Yield

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tech Innovators Yield are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Tech Innovators exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BMO SP and Tech Innovators

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

The idea behind BMO SP 500 and Tech Innovators Yield 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.