Correlation Between IShares ESG and BMO Short
Can any of the company-specific risk be diversified away by investing in both IShares ESG 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 ESG 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 ESG Aware and BMO Short Corporate, you can compare the effects of market volatilities on IShares ESG 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 ESG with a short position of BMO Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares ESG and BMO Short.
Diversification Opportunities for IShares ESG and BMO Short
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and BMO is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aware and BMO Short Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Short Corporate and IShares ESG 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 ESG Aware 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 Corporate has no effect on the direction of IShares ESG i.e., IShares ESG and BMO Short go up and down completely randomly.
Pair Corralation between IShares ESG and BMO Short
Assuming the 90 days trading horizon iShares ESG Aware is expected to generate 2.37 times more return on investment than BMO Short. However, IShares ESG is 2.37 times more volatile than BMO Short Corporate. It trades about 0.15 of its potential returns per unit of risk. BMO Short Corporate is currently generating about 0.22 per unit of risk. If you would invest 1,825 in iShares ESG Aware on September 12, 2024 and sell it today you would earn a total of 22.00 from holding iShares ESG Aware or generate 1.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
iShares ESG Aware vs. BMO Short Corporate
Performance |
| Timeline |
| iShares ESG Aware |
| BMO Short Corporate |
IShares ESG and BMO Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares ESG and BMO Short
The main advantage of trading using opposite IShares ESG and BMO Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares ESG 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 ESG vs. iShares Core Canadian | IShares ESG vs. iShares Core Canadian | IShares ESG vs. iShares Canadian Real | IShares ESG vs. iShares Canadian Value |
| BMO Short vs. BMO Long Federal | BMO Short vs. BMO Mid Federal | BMO Short vs. BMO Mid Corporate | BMO Short vs. BMO High Yield |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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