Correlation Between IShares Canadian and BMO Core
Can any of the company-specific risk be diversified away by investing in both IShares Canadian and BMO Core 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 Canadian and BMO Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Canadian Universe and BMO Core Plus, you can compare the effects of market volatilities on IShares Canadian and BMO Core 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 Canadian with a short position of BMO Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Canadian and BMO Core.
Diversification Opportunities for IShares Canadian and BMO Core
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and BMO is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian Universe and BMO Core Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Core Plus and IShares Canadian 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 Canadian Universe are associated (or correlated) with BMO Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Core Plus has no effect on the direction of IShares Canadian i.e., IShares Canadian and BMO Core go up and down completely randomly.
Pair Corralation between IShares Canadian and BMO Core
Assuming the 90 days trading horizon IShares Canadian is expected to generate 1.11 times less return on investment than BMO Core. But when comparing it to its historical volatility, iShares Canadian Universe is 1.0 times less risky than BMO Core. It trades about 0.04 of its potential returns per unit of risk. BMO Core Plus is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,613 in BMO Core Plus on August 29, 2024 and sell it today you would earn a total of 197.00 from holding BMO Core Plus or generate 7.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Canadian Universe vs. BMO Core Plus
Performance |
| Timeline |
| iShares Canadian Universe |
| BMO Core Plus |
IShares Canadian and BMO Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Canadian and BMO Core
The main advantage of trading using opposite IShares Canadian and BMO Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Canadian position performs unexpectedly, BMO Core 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 Core will offset losses from the drop in BMO Core's long position.| IShares Canadian vs. Mackenzie Core Plus | IShares Canadian vs. Mackenzie Unconstrained Bond | IShares Canadian vs. Mackenzie Floating Rate | IShares Canadian vs. Mackenzie Canadian Short |
| BMO Core vs. Mackenzie Core Plus | BMO Core vs. Mackenzie Unconstrained Bond | BMO Core vs. Mackenzie Floating Rate | BMO Core vs. Mackenzie Canadian Short |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
Other Complementary Tools
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |