Correlation Between IShares Floating and BMO Short
Can any of the company-specific risk be diversified away by investing in both IShares Floating and BMO Short 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 Floating and BMO Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Floating Rate and BMO Short Corporate, you can compare the effects of market volatilities on IShares Floating and BMO Short 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 Floating with a short position of BMO Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Floating and BMO Short.
Diversification Opportunities for IShares Floating and BMO Short
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and BMO is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding iShares Floating Rate and BMO Short Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Short Corporate and IShares Floating 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 Floating Rate are associated (or correlated) with BMO Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Short Corporate has no effect on the direction of IShares Floating i.e., IShares Floating and BMO Short go up and down completely randomly.
Pair Corralation between IShares Floating and BMO Short
Assuming the 90 days trading horizon IShares Floating is expected to generate 2.18 times less return on investment than BMO Short. But when comparing it to its historical volatility, iShares Floating Rate is 3.72 times less risky than BMO Short. It trades about 0.31 of its potential returns per unit of risk. BMO Short Corporate is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 1,378 in BMO Short Corporate on September 1, 2024 and sell it today you would earn a total of 9.00 from holding BMO Short Corporate or generate 0.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Floating Rate vs. BMO Short Corporate
Performance |
| Timeline |
| iShares Floating Rate |
| BMO Short Corporate |
IShares Floating and BMO Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Floating and BMO Short
The main advantage of trading using opposite IShares Floating and BMO Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Floating position performs unexpectedly, BMO Short 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 Short will offset losses from the drop in BMO Short's long position.| IShares Floating vs. iShares 1 10Yr Laddered | IShares Floating vs. iShares JP Morgan | IShares Floating vs. iShares Convertible Bond | IShares Floating vs. iShares IG Corporate |
| BMO Short vs. Vanguard Total Market | BMO Short vs. iShares High Quality | BMO Short vs. iShares 1 10Yr Laddered | BMO Short vs. iShares Canadian HYBrid |
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 Managers module to screen money managers from public funds and ETFs managed around the world.
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