Correlation Between IShares High and BMO Short
Can any of the company-specific risk be diversified away by investing in both IShares High and BMO Short 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 High and BMO Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares High Quality and BMO Short Term Bond, you can compare the effects of market volatilities on IShares High and BMO Short 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 High with a short position of BMO Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares High and BMO Short.
Diversification Opportunities for IShares High and BMO Short
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and BMO is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding iShares High Quality and BMO Short Term Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Short Term and IShares High 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 High Quality are associated (or correlated) with BMO Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Short Term has no effect on the direction of IShares High i.e., IShares High and BMO Short go up and down completely randomly.
Pair Corralation between IShares High and BMO Short
Assuming the 90 days trading horizon iShares High Quality is expected to generate 2.66 times more return on investment than BMO Short. However, IShares High is 2.66 times more volatile than BMO Short Term Bond. It trades about 0.04 of its potential returns per unit of risk. BMO Short Term Bond is currently generating about 0.1 per unit of risk. If you would invest 1,757 in iShares High Quality on September 2, 2024 and sell it today you would earn a total of 168.00 from holding iShares High Quality or generate 9.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.19% |
| Values | Daily Returns |
iShares High Quality vs. BMO Short Term Bond
Performance |
| Timeline |
| iShares High Quality |
| BMO Short Term |
IShares High and BMO Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares High and BMO Short
The main advantage of trading using opposite IShares High and BMO Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares High position performs unexpectedly, BMO Short 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 Short will offset losses from the drop in BMO Short's long position.| IShares High vs. iShares 1 10Yr Laddered | IShares High vs. iShares Floating Rate | IShares High vs. iShares IG Corporate | IShares High vs. Global X Active |
| BMO Short vs. BMO Corporate Bond | BMO Short vs. BMO Government Bond | BMO Short vs. BMO Ultra Short Term | BMO Short vs. BMO Short Term IG |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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