Correlation Between IShares Core and BMO Low
Can any of the company-specific risk be diversified away by investing in both IShares Core and BMO Low 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 Low into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core SPTSX and BMO Low Volatility, you can compare the effects of market volatilities on IShares Core and BMO Low 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 Low. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and BMO Low.
Diversification Opportunities for IShares Core and BMO Low
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and BMO is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SPTSX and BMO Low Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Low Volatility 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 SPTSX are associated (or correlated) with BMO Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Low Volatility has no effect on the direction of IShares Core i.e., IShares Core and BMO Low go up and down completely randomly.
Pair Corralation between IShares Core and BMO Low
Assuming the 90 days trading horizon iShares Core SPTSX is expected to generate 1.35 times more return on investment than BMO Low. However, IShares Core is 1.35 times more volatile than BMO Low Volatility. It trades about 0.3 of its potential returns per unit of risk. BMO Low Volatility is currently generating about -0.02 per unit of risk. If you would invest 3,915 in iShares Core SPTSX on August 25, 2024 and sell it today you would earn a total of 149.00 from holding iShares Core SPTSX or generate 3.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core SPTSX vs. BMO Low Volatility
Performance |
| Timeline |
| iShares Core SPTSX |
| BMO Low Volatility |
IShares Core and BMO Low Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and BMO Low
The main advantage of trading using opposite IShares Core and BMO Low positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, BMO Low 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 Low will offset losses from the drop in BMO Low's long position.| IShares Core vs. iShares SPTSX 60 | IShares Core vs. iShares Core SP | IShares Core vs. iShares SPTSX Composite | IShares Core vs. iShares Core MSCI |
| BMO Low vs. iShares SPTSX 60 | BMO Low vs. iShares Core SP | BMO Low vs. iShares SPTSX Composite | BMO Low vs. iShares Core MSCI |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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