Correlation Between IShares 1 and BMO Short
Can any of the company-specific risk be diversified away by investing in both IShares 1 and BMO Short 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 1 and BMO Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares 1 5 Year and BMO Short Term Bond, you can compare the effects of market volatilities on IShares 1 and BMO Short 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 1 with a short position of BMO Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 1 and BMO Short.
Diversification Opportunities for IShares 1 and BMO Short
Almost no diversification
The 3 months correlation between IShares and BMO is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares 1 5 Year and BMO Short Term Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Short Term and IShares 1 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 1 5 Year are associated (or correlated) with BMO Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Short Term has no effect on the direction of IShares 1 i.e., IShares 1 and BMO Short go up and down completely randomly.
Pair Corralation between IShares 1 and BMO Short
Assuming the 90 days trading horizon iShares 1 5 Year is expected to generate 1.12 times more return on investment than BMO Short. However, IShares 1 is 1.12 times more volatile than BMO Short Term Bond. It trades about 0.12 of its potential returns per unit of risk. BMO Short Term Bond is currently generating about 0.09 per unit of risk. If you would invest 1,827 in iShares 1 5 Year on October 26, 2024 and sell it today you would earn a total of 7.00 from holding iShares 1 5 Year or generate 0.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.0% |
| Values | Daily Returns |
iShares 1 5 Year vs. BMO Short Term Bond
Performance |
| Timeline |
| iShares 1 5 |
| BMO Short Term |
IShares 1 and BMO Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares 1 and BMO Short
The main advantage of trading using opposite IShares 1 and BMO Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 1 position performs unexpectedly, BMO Short 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 Short will offset losses from the drop in BMO Short's long position.| IShares 1 vs. iShares 1 5 Year | IShares 1 vs. iShares SPTSX Canadian | IShares 1 vs. iShares Core Canadian | IShares 1 vs. iShares High Yield |
| BMO Short vs. BMO Corporate Bond | BMO Short vs. BMO Government Bond | BMO Short vs. BMO Ultra Short Term | BMO Short vs. BMO Short Term IG |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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