Correlation Between IShares Core and BMO Floating
Can any of the company-specific risk be diversified away by investing in both IShares Core and BMO Floating 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 Floating into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core SP and BMO Floating Rate, you can compare the effects of market volatilities on IShares Core and BMO Floating 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 Floating. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and BMO Floating.
Diversification Opportunities for IShares Core and BMO Floating
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and BMO is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and BMO Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Floating Rate 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 SP are associated (or correlated) with BMO Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Floating Rate has no effect on the direction of IShares Core i.e., IShares Core and BMO Floating go up and down completely randomly.
Pair Corralation between IShares Core and BMO Floating
Assuming the 90 days trading horizon iShares Core SP is expected to generate 3.2 times more return on investment than BMO Floating. However, IShares Core is 3.2 times more volatile than BMO Floating Rate. It trades about 0.15 of its potential returns per unit of risk. BMO Floating Rate is currently generating about 0.3 per unit of risk. If you would invest 6,083 in iShares Core SP on August 29, 2024 and sell it today you would earn a total of 180.00 from holding iShares Core SP or generate 2.96% 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 SP vs. BMO Floating Rate
Performance |
| Timeline |
| iShares Core SP |
| BMO Floating Rate |
IShares Core and BMO Floating Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and BMO Floating
The main advantage of trading using opposite IShares Core and BMO Floating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, BMO Floating 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 Floating will offset losses from the drop in BMO Floating's long position.| IShares Core vs. BMO Low Volatility | IShares Core vs. BMO MSCI USA | IShares Core vs. BMO Equal Weight | IShares Core vs. BMO Dividend ETF |
| BMO Floating vs. BMO Emerging Markets | BMO Floating vs. BMO Long Corporate | BMO Floating vs. BMO High Yield | BMO Floating vs. BMO Mid Corporate |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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