Correlation Between IShares Floating and BMO High
Can any of the company-specific risk be diversified away by investing in both IShares Floating and BMO High 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 High 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 High Yield, you can compare the effects of market volatilities on IShares Floating and BMO High 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 High. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Floating and BMO High.
Diversification Opportunities for IShares Floating and BMO High
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between IShares and BMO is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding iShares Floating Rate and BMO High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO High Yield 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 High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO High Yield has no effect on the direction of IShares Floating i.e., IShares Floating and BMO High go up and down completely randomly.
Pair Corralation between IShares Floating and BMO High
Assuming the 90 days trading horizon IShares Floating is expected to generate 1.28 times less return on investment than BMO High. But when comparing it to its historical volatility, iShares Floating Rate is 4.99 times less risky than BMO High. It trades about 0.34 of its potential returns per unit of risk. BMO High Yield is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,129 in BMO High Yield on September 12, 2024 and sell it today you would earn a total of 5.00 from holding BMO High Yield or generate 0.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Floating Rate vs. BMO High Yield
Performance |
| Timeline |
| iShares Floating Rate |
| BMO High Yield |
IShares Floating and BMO High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Floating and BMO High
The main advantage of trading using opposite IShares Floating and BMO High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Floating position performs unexpectedly, BMO High 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 High will offset losses from the drop in BMO High's long position.| IShares Floating vs. iShares Canadian Universe | IShares Floating vs. iShares Canadian Real | IShares Floating vs. iShares Core Canadian | IShares Floating vs. iShares Core Canadian |
| BMO High vs. Purpose Premium Yield | BMO High vs. Purpose Monthly Income | BMO High vs. Purpose International Dividend | BMO High vs. Purpose Enhanced Dividend |
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.
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