Correlation Between IShares Core and BMO Real
Can any of the company-specific risk be diversified away by investing in both IShares Core and BMO Real 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 Real into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core Canadian and BMO Real Return, you can compare the effects of market volatilities on IShares Core and BMO Real 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 Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and BMO Real.
Diversification Opportunities for IShares Core and BMO Real
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and BMO is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Canadian and BMO Real Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Real Return 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 Canadian are associated (or correlated) with BMO Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Real Return has no effect on the direction of IShares Core i.e., IShares Core and BMO Real go up and down completely randomly.
Pair Corralation between IShares Core and BMO Real
Assuming the 90 days trading horizon iShares Core Canadian is expected to generate 1.13 times more return on investment than BMO Real. However, IShares Core is 1.13 times more volatile than BMO Real Return. It trades about 0.04 of its potential returns per unit of risk. BMO Real Return is currently generating about 0.03 per unit of risk. If you would invest 1,809 in iShares Core Canadian on August 31, 2024 and sell it today you would earn a total of 199.00 from holding iShares Core Canadian or generate 11.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core Canadian vs. BMO Real Return
Performance |
| Timeline |
| iShares Core Canadian |
| BMO Real Return |
IShares Core and BMO Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and BMO Real
The main advantage of trading using opposite IShares Core and BMO Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, BMO Real 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 Real will offset losses from the drop in BMO Real's long position.| IShares Core vs. iShares MSCI Emerging | IShares Core vs. iShares MSCI Global | IShares Core vs. iShares Core Canadian | IShares Core vs. Vanguard Total Market |
| BMO Real vs. BMO Long Corporate | BMO Real vs. BMO Short Provincial | BMO Real vs. BMO Short Federal | BMO Real vs. BMO Emerging Markets |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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