Correlation Between IShares Core and BMO Balanced
Can any of the company-specific risk be diversified away by investing in both IShares Core and BMO Balanced 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 Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core Growth and BMO Balanced ETF, you can compare the effects of market volatilities on IShares Core and BMO Balanced 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 Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and BMO Balanced.
Diversification Opportunities for IShares Core and BMO Balanced
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and BMO is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Growth and BMO Balanced ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Balanced ETF 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 Growth are associated (or correlated) with BMO Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Balanced ETF has no effect on the direction of IShares Core i.e., IShares Core and BMO Balanced go up and down completely randomly.
Pair Corralation between IShares Core and BMO Balanced
Assuming the 90 days trading horizon iShares Core Growth is expected to under-perform the BMO Balanced. In addition to that, IShares Core is 1.38 times more volatile than BMO Balanced ETF. It trades about -0.05 of its total potential returns per unit of risk. BMO Balanced ETF is currently generating about -0.07 per unit of volatility. If you would invest 4,044 in BMO Balanced ETF on January 16, 2025 and sell it today you would lose (160.00) from holding BMO Balanced ETF or give up 3.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core Growth vs. BMO Balanced ETF
Performance |
| Timeline |
| iShares Core Growth |
| BMO Balanced ETF |
IShares Core and BMO Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and BMO Balanced
The main advantage of trading using opposite IShares Core and BMO Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, BMO Balanced 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 Balanced will offset losses from the drop in BMO Balanced's long position.| IShares Core vs. iShares Core Balanced | IShares Core vs. Vanguard Growth Portfolio | IShares Core vs. iShares Core Equity | IShares Core vs. Vanguard All Equity ETF |
| BMO Balanced vs. BMO Growth ETF | BMO Balanced vs. BMO Conservative ETF | BMO Balanced vs. iShares Core Balanced | BMO Balanced vs. Vanguard Balanced Portfolio |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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