Correlation Between IShares Convertible and BMO Emerging
Can any of the company-specific risk be diversified away by investing in both IShares Convertible and BMO Emerging 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 Convertible and BMO Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Convertible Bond and BMO Emerging Markets, you can compare the effects of market volatilities on IShares Convertible and BMO Emerging 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 Convertible with a short position of BMO Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Convertible and BMO Emerging.
Diversification Opportunities for IShares Convertible and BMO Emerging
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IShares and BMO is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding iShares Convertible Bond and BMO Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Emerging Markets and IShares Convertible 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 Convertible Bond are associated (or correlated) with BMO Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Emerging Markets has no effect on the direction of IShares Convertible i.e., IShares Convertible and BMO Emerging go up and down completely randomly.
Pair Corralation between IShares Convertible and BMO Emerging
Assuming the 90 days trading horizon iShares Convertible Bond is expected to generate 1.35 times more return on investment than BMO Emerging. However, IShares Convertible is 1.35 times more volatile than BMO Emerging Markets. It trades about 0.05 of its potential returns per unit of risk. BMO Emerging Markets is currently generating about 0.05 per unit of risk. If you would invest 1,477 in iShares Convertible Bond on August 29, 2024 and sell it today you would earn a total of 255.00 from holding iShares Convertible Bond or generate 17.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Convertible Bond vs. BMO Emerging Markets
Performance |
| Timeline |
| iShares Convertible Bond |
| BMO Emerging Markets |
IShares Convertible and BMO Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Convertible and BMO Emerging
The main advantage of trading using opposite IShares Convertible and BMO Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Convertible position performs unexpectedly, BMO Emerging 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 Emerging will offset losses from the drop in BMO Emerging's long position.| IShares Convertible vs. Purpose Monthly Income | IShares Convertible vs. Purpose Core Dividend | IShares Convertible vs. Purpose Tactical Hedged | IShares Convertible vs. Purpose Best Ideas |
| BMO Emerging vs. BMO High Yield | BMO Emerging vs. BMO Mid Corporate | BMO Emerging vs. BMO Long Corporate | BMO Emerging vs. BMO Short Provincial |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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