Correlation Between IShares Gold and BMO Junior
Can any of the company-specific risk be diversified away by investing in both IShares Gold and BMO Junior 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 Junior 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 Junior Gold, you can compare the effects of market volatilities on IShares Gold and BMO Junior 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 Junior. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Gold and BMO Junior.
Diversification Opportunities for IShares Gold and BMO Junior
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and BMO is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding iShares Gold Bullion and BMO Junior Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Junior Gold 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 Junior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Junior Gold has no effect on the direction of IShares Gold i.e., IShares Gold and BMO Junior go up and down completely randomly.
Pair Corralation between IShares Gold and BMO Junior
Assuming the 90 days trading horizon IShares Gold is expected to generate 9.74 times less return on investment than BMO Junior. But when comparing it to its historical volatility, iShares Gold Bullion is 1.85 times less risky than BMO Junior. It trades about 0.01 of its potential returns per unit of risk. BMO Junior Gold is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 9,282 in BMO Junior Gold on August 30, 2024 and sell it today you would earn a total of 418.00 from holding BMO Junior Gold or generate 4.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Gold Bullion vs. BMO Junior Gold
Performance |
| Timeline |
| iShares Gold Bullion |
| BMO Junior Gold |
IShares Gold and BMO Junior Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Gold and BMO Junior
The main advantage of trading using opposite IShares Gold and BMO Junior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Gold position performs unexpectedly, BMO Junior 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 Junior will offset losses from the drop in BMO Junior's long position.The idea behind iShares Gold Bullion and BMO Junior Gold 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 Junior vs. iShares SPTSX Capped | BMO Junior vs. iShares SPTSX Capped | BMO Junior vs. iShares SPTSX Capped | BMO Junior vs. iShares SPTSX Capped |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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