Correlation Between IShares Global and BMO Equal
Can any of the company-specific risk be diversified away by investing in both IShares Global and BMO Equal 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 Global and BMO Equal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Global Healthcare and BMO Equal Weight, you can compare the effects of market volatilities on IShares Global and BMO Equal 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 Global with a short position of BMO Equal. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Global and BMO Equal.
Diversification Opportunities for IShares Global and BMO Equal
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and BMO is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Healthcare and BMO Equal Weight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Equal Weight and IShares Global 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 Global Healthcare are associated (or correlated) with BMO Equal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Equal Weight has no effect on the direction of IShares Global i.e., IShares Global and BMO Equal go up and down completely randomly.
Pair Corralation between IShares Global and BMO Equal
Assuming the 90 days trading horizon IShares Global is expected to generate 1.91 times less return on investment than BMO Equal. But when comparing it to its historical volatility, iShares Global Healthcare is 1.09 times less risky than BMO Equal. It trades about 0.16 of its potential returns per unit of risk. BMO Equal Weight is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 6,670 in BMO Equal Weight on October 25, 2024 and sell it today you would earn a total of 259.00 from holding BMO Equal Weight or generate 3.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Global Healthcare vs. BMO Equal Weight
Performance |
| Timeline |
| iShares Global Healthcare |
| BMO Equal Weight |
IShares Global and BMO Equal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Global and BMO Equal
The main advantage of trading using opposite IShares Global and BMO Equal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Global position performs unexpectedly, BMO Equal 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 Equal will offset losses from the drop in BMO Equal's long position.| IShares Global vs. iShares SPTSX Capped | IShares Global vs. iShares SPTSX Capped | IShares Global vs. iShares Global Real | IShares Global vs. iShares Global Infrastructure |
| BMO Equal vs. BMO Equal Weight | BMO Equal vs. BMO Global Infrastructure | BMO Equal vs. iShares Global Healthcare | BMO Equal vs. BMO Low Volatility |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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