Correlation Between IShares Canadian and BMO Europe
Can any of the company-specific risk be diversified away by investing in both IShares Canadian and BMO Europe 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 Europe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Canadian HYBrid and BMO Europe High, you can compare the effects of market volatilities on IShares Canadian and BMO Europe 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 Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Canadian and BMO Europe.
Diversification Opportunities for IShares Canadian and BMO Europe
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IShares and BMO is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian HYBrid and BMO Europe High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Europe High 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 HYBrid are associated (or correlated) with BMO Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Europe High has no effect on the direction of IShares Canadian i.e., IShares Canadian and BMO Europe go up and down completely randomly.
Pair Corralation between IShares Canadian and BMO Europe
Assuming the 90 days trading horizon iShares Canadian HYBrid is expected to generate 0.34 times more return on investment than BMO Europe. However, iShares Canadian HYBrid is 2.98 times less risky than BMO Europe. It trades about 0.1 of its potential returns per unit of risk. BMO Europe High is currently generating about -0.29 per unit of risk. If you would invest 1,953 in iShares Canadian HYBrid on August 29, 2024 and sell it today you would earn a total of 11.00 from holding iShares Canadian HYBrid or generate 0.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Canadian HYBrid vs. BMO Europe High
Performance |
| Timeline |
| iShares Canadian HYBrid |
| BMO Europe High |
IShares Canadian and BMO Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Canadian and BMO Europe
The main advantage of trading using opposite IShares Canadian and BMO Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Canadian position performs unexpectedly, BMO Europe 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 Europe will offset losses from the drop in BMO Europe's long position.| IShares Canadian vs. iShares IG Corporate | IShares Canadian vs. iShares High Yield | IShares Canadian vs. iShares Floating Rate | IShares Canadian vs. iShares JP Morgan |
| BMO Europe vs. BMO Europe High | BMO Europe vs. BMO High Dividend | BMO Europe vs. BMO Covered Call | BMO Europe vs. BMO Global High |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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