Correlation Between IShares Gold and BMO Equal
Can any of the company-specific risk be diversified away by investing in both IShares Gold and BMO Equal 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 Gold and BMO Equal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Gold Bullion and BMO Equal Weight, you can compare the effects of market volatilities on IShares Gold and BMO Equal 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 Gold with a short position of BMO Equal. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Gold and BMO Equal.
Diversification Opportunities for IShares Gold and BMO Equal
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and BMO is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding iShares Gold Bullion and BMO Equal Weight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Equal Weight and IShares Gold 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 Gold Bullion are associated (or correlated) with BMO Equal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Equal Weight has no effect on the direction of IShares Gold i.e., IShares Gold and BMO Equal go up and down completely randomly.
Pair Corralation between IShares Gold and BMO Equal
Assuming the 90 days trading horizon iShares Gold Bullion is expected to under-perform the BMO Equal. In addition to that, IShares Gold is 1.21 times more volatile than BMO Equal Weight. It trades about -0.16 of its total potential returns per unit of risk. BMO Equal Weight is currently generating about 0.11 per unit of volatility. If you would invest 7,383 in BMO Equal Weight on August 30, 2024 and sell it today you would earn a total of 199.00 from holding BMO Equal Weight or generate 2.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Gold Bullion vs. BMO Equal Weight
Performance |
| Timeline |
| iShares Gold Bullion |
| BMO Equal Weight |
IShares Gold and BMO Equal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Gold and BMO Equal
The main advantage of trading using opposite IShares Gold and BMO Equal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Gold position performs unexpectedly, BMO Equal 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 Equal will offset losses from the drop in BMO Equal's long position.The idea behind iShares Gold Bullion and BMO Equal Weight 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.| BMO Equal vs. iShares SPTSX Capped | BMO Equal vs. BMO Equal Weight | BMO Equal vs. BMO SPTSX Equal | BMO Equal vs. BMO Equal Weight |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
Other Complementary Tools
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators |