Correlation Between IShares Canadian and BMO Premium
Can any of the company-specific risk be diversified away by investing in both IShares Canadian and BMO Premium 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 Premium 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 Premium Yield, you can compare the effects of market volatilities on IShares Canadian and BMO Premium 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 Premium. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Canadian and BMO Premium.
Diversification Opportunities for IShares Canadian and BMO Premium
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IShares and BMO is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian Universe and BMO Premium Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Premium Yield 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 Premium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Premium Yield has no effect on the direction of IShares Canadian i.e., IShares Canadian and BMO Premium go up and down completely randomly.
Pair Corralation between IShares Canadian and BMO Premium
Assuming the 90 days trading horizon IShares Canadian is expected to generate 6.56 times less return on investment than BMO Premium. But when comparing it to its historical volatility, iShares Canadian Universe is 1.01 times less risky than BMO Premium. It trades about 0.02 of its potential returns per unit of risk. BMO Premium Yield is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 2,851 in BMO Premium Yield on August 25, 2024 and sell it today you would earn a total of 403.00 from holding BMO Premium Yield or generate 14.14% 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 Premium Yield
Performance |
| Timeline |
| iShares Canadian Universe |
| BMO Premium Yield |
IShares Canadian and BMO Premium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Canadian and BMO Premium
The main advantage of trading using opposite IShares Canadian and BMO Premium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Canadian position performs unexpectedly, BMO Premium 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 Premium will offset losses from the drop in BMO Premium'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 Aggregate |
| BMO Premium vs. Global Atomic Corp | BMO Premium vs. enCore Energy Corp | BMO Premium vs. Fission Uranium Corp | BMO Premium vs. NexGen Energy |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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