Correlation Between BMO Global and IShares Global
Can any of the company-specific risk be diversified away by investing in both BMO Global and IShares Global 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 BMO Global and IShares Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Global Consumer and iShares Global Healthcare, you can compare the effects of market volatilities on BMO Global and IShares Global 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 BMO Global with a short position of IShares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Global and IShares Global.
Diversification Opportunities for BMO Global and IShares Global
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BMO and IShares is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding BMO Global Consumer and iShares Global Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Healthcare and BMO Global 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 BMO Global Consumer are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Healthcare has no effect on the direction of BMO Global i.e., BMO Global and IShares Global go up and down completely randomly.
Pair Corralation between BMO Global and IShares Global
Assuming the 90 days trading horizon BMO Global is expected to generate 1.42 times less return on investment than IShares Global. But when comparing it to its historical volatility, BMO Global Consumer is 1.13 times less risky than IShares Global. It trades about 0.27 of its potential returns per unit of risk. iShares Global Healthcare is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 6,551 in iShares Global Healthcare on November 4, 2024 and sell it today you would earn a total of 366.00 from holding iShares Global Healthcare or generate 5.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Global Consumer vs. iShares Global Healthcare
Performance |
| Timeline |
| BMO Global Consumer |
| iShares Global Healthcare |
BMO Global and IShares Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Global and IShares Global
The main advantage of trading using opposite BMO Global and IShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Global position performs unexpectedly, IShares Global 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 IShares Global will offset losses from the drop in IShares Global's long position.| BMO Global vs. BMO Global Consumer | BMO Global vs. BMO Global Communications | BMO Global vs. BMO SPTSX Equal | BMO Global vs. iShares SP Global |
| IShares Global vs. iShares SPTSX Capped | IShares Global vs. iShares SPTSX Capped | IShares Global vs. iShares Global Real | IShares Global vs. iShares Global Infrastructure |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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