Correlation Between IShares ESG and BMO Growth
Can any of the company-specific risk be diversified away by investing in both IShares ESG and BMO Growth 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 ESG and BMO Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares ESG Growth and BMO Growth ETF, you can compare the effects of market volatilities on IShares ESG and BMO Growth 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 ESG with a short position of BMO Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares ESG and BMO Growth.
Diversification Opportunities for IShares ESG and BMO Growth
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and BMO is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Growth and BMO Growth ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Growth ETF and IShares ESG 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 ESG Growth are associated (or correlated) with BMO Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Growth ETF has no effect on the direction of IShares ESG i.e., IShares ESG and BMO Growth go up and down completely randomly.
Pair Corralation between IShares ESG and BMO Growth
Assuming the 90 days trading horizon iShares ESG Growth is expected to generate 1.24 times more return on investment than BMO Growth. However, IShares ESG is 1.24 times more volatile than BMO Growth ETF. It trades about 0.16 of its potential returns per unit of risk. BMO Growth ETF is currently generating about 0.18 per unit of risk. If you would invest 4,830 in iShares ESG Growth on August 29, 2024 and sell it today you would earn a total of 1,020 from holding iShares ESG Growth or generate 21.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares ESG Growth vs. BMO Growth ETF
Performance |
| Timeline |
| iShares ESG Growth |
| BMO Growth ETF |
IShares ESG and BMO Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares ESG and BMO Growth
The main advantage of trading using opposite IShares ESG and BMO Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares ESG position performs unexpectedly, BMO Growth 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 Growth will offset losses from the drop in BMO Growth's long position.| IShares ESG vs. BMO Balanced ETF | IShares ESG vs. BMO Conservative ETF | IShares ESG vs. iShares Core Growth | IShares ESG vs. iShares Core Balanced |
| BMO Growth vs. BMO Balanced ETF | BMO Growth vs. BMO Conservative ETF | BMO Growth vs. iShares Core Growth | BMO Growth vs. iShares Core Balanced |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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