Correlation Between IShares Convertible and BMO High
Can any of the company-specific risk be diversified away by investing in both IShares Convertible and BMO High 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 High 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 High Yield, you can compare the effects of market volatilities on IShares Convertible and BMO High 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 High. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Convertible and BMO High.
Diversification Opportunities for IShares Convertible and BMO High
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and BMO is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding iShares Convertible Bond and BMO High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO High Yield 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 High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO High Yield has no effect on the direction of IShares Convertible i.e., IShares Convertible and BMO High go up and down completely randomly.
Pair Corralation between IShares Convertible and BMO High
Assuming the 90 days trading horizon iShares Convertible Bond is expected to under-perform the BMO High. In addition to that, IShares Convertible is 1.3 times more volatile than BMO High Yield. It trades about -0.04 of its total potential returns per unit of risk. BMO High Yield is currently generating about 0.21 per unit of volatility. If you would invest 1,869 in BMO High Yield on August 25, 2024 and sell it today you would earn a total of 33.00 from holding BMO High Yield or generate 1.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Convertible Bond vs. BMO High Yield
Performance |
| Timeline |
| iShares Convertible Bond |
| BMO High Yield |
IShares Convertible and BMO High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Convertible and BMO High
The main advantage of trading using opposite IShares Convertible and BMO High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Convertible position performs unexpectedly, BMO High 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 High will offset losses from the drop in BMO High's long position.| IShares Convertible vs. BMO Mid Federal | IShares Convertible vs. BMO Short Corporate | IShares Convertible vs. BMO Emerging Markets | IShares Convertible vs. BMO Long Corporate |
| BMO High vs. BMO High Yield | BMO High vs. BMO Preferred Share | BMO High vs. BMO Preferred Share | BMO High vs. BMO Europe High |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
Other Complementary Tools
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity |