Correlation Between IShares Canadian and BMO Floating
Can any of the company-specific risk be diversified away by investing in both IShares Canadian and BMO Floating 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 Floating 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 Floating Rate, you can compare the effects of market volatilities on IShares Canadian and BMO Floating 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 Floating. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Canadian and BMO Floating.
Diversification Opportunities for IShares Canadian and BMO Floating
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IShares and BMO is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian Universe and BMO Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Floating Rate 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 Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Floating Rate has no effect on the direction of IShares Canadian i.e., IShares Canadian and BMO Floating go up and down completely randomly.
Pair Corralation between IShares Canadian and BMO Floating
Assuming the 90 days trading horizon IShares Canadian is expected to generate 2.0 times less return on investment than BMO Floating. In addition to that, IShares Canadian is 1.46 times more volatile than BMO Floating Rate. It trades about 0.11 of its total potential returns per unit of risk. BMO Floating Rate is currently generating about 0.31 per unit of volatility. If you would invest 1,480 in BMO Floating Rate on August 30, 2024 and sell it today you would earn a total of 28.00 from holding BMO Floating Rate or generate 1.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Canadian Universe vs. BMO Floating Rate
Performance |
| Timeline |
| iShares Canadian Universe |
| BMO Floating Rate |
IShares Canadian and BMO Floating Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Canadian and BMO Floating
The main advantage of trading using opposite IShares Canadian and BMO Floating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Canadian position performs unexpectedly, BMO Floating 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 Floating will offset losses from the drop in BMO Floating's long position.| IShares Canadian vs. iShares Canadian Short | IShares Canadian vs. iShares MSCI EAFE | IShares Canadian vs. iShares Core Canadian | IShares Canadian vs. iShares Canadian Real |
| BMO Floating vs. BMO Emerging Markets | BMO Floating vs. BMO Long Corporate | BMO Floating vs. BMO High Yield | BMO Floating vs. BMO Mid Corporate |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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