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 SP 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
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and BMO is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP 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 SP 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 SP is expected to generate 1.62 times more return on investment than BMO Low. However, IShares Core is 1.62 times more volatile than BMO Low Volatility. It trades about 0.13 of its potential returns per unit of risk. BMO Low Volatility is currently generating about 0.16 per unit of risk. If you would invest 4,203 in iShares Core SP on September 1, 2024 and sell it today you would earn a total of 819.00 from holding iShares Core SP or generate 19.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core SP vs. BMO Low Volatility
Performance |
| Timeline |
| iShares Core SP |
| 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. BMO SP 500 | IShares Core vs. Vanguard SP 500 | IShares Core vs. iShares Core SP | IShares Core vs. BMO SP 500 |
| BMO Low vs. BMO Low Volatility | BMO Low vs. BMO SPTSX Capped | BMO Low vs. BMO Canadian Dividend | BMO Low vs. BMO SP 500 |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
Other Complementary Tools
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |