Correlation Between IShares Core and BMO Long
Can any of the company-specific risk be diversified away by investing in both IShares Core and BMO Long 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 Core and BMO Long into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core Canadian and BMO Long Corporate, you can compare the effects of market volatilities on IShares Core and BMO Long 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 Core with a short position of BMO Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and BMO Long.
Diversification Opportunities for IShares Core and BMO Long
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and BMO is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Canadian and BMO Long Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Long Corporate and IShares Core 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 Core Canadian are associated (or correlated) with BMO Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Long Corporate has no effect on the direction of IShares Core i.e., IShares Core and BMO Long go up and down completely randomly.
Pair Corralation between IShares Core and BMO Long
Assuming the 90 days trading horizon IShares Core is expected to generate 1.38 times less return on investment than BMO Long. But when comparing it to its historical volatility, iShares Core Canadian is 2.07 times less risky than BMO Long. It trades about 0.16 of its potential returns per unit of risk. BMO Long Corporate is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,439 in BMO Long Corporate on August 29, 2024 and sell it today you would earn a total of 114.00 from holding BMO Long Corporate or generate 7.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core Canadian vs. BMO Long Corporate
Performance |
| Timeline |
| iShares Core Canadian |
| BMO Long Corporate |
IShares Core and BMO Long Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and BMO Long
The main advantage of trading using opposite IShares Core and BMO Long positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, BMO Long 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 Long will offset losses from the drop in BMO Long's long position.| IShares Core vs. BMO Long Corporate | IShares Core vs. BMO Short Corporate | IShares Core vs. BMO High Yield | IShares Core vs. BMO Short Provincial |
| BMO Long vs. BMO Mid Corporate | BMO Long vs. BMO Short Corporate | BMO Long vs. BMO High Yield | BMO Long vs. BMO Long Provincial |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
Other Complementary Tools
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges |