Correlation Between BMO Short and IShares Floating
Can any of the company-specific risk be diversified away by investing in both BMO Short and IShares 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 BMO Short and IShares Floating into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Short Corporate and iShares Floating Rate, you can compare the effects of market volatilities on BMO Short and IShares 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 BMO Short with a short position of IShares Floating. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Short and IShares Floating.
Diversification Opportunities for BMO Short and IShares Floating
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BMO and IShares is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding BMO Short Corporate and iShares Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Floating Rate and BMO Short 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 BMO Short Corporate are associated (or correlated) with IShares Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Floating Rate has no effect on the direction of BMO Short i.e., BMO Short and IShares Floating go up and down completely randomly.
Pair Corralation between BMO Short and IShares Floating
Assuming the 90 days trading horizon BMO Short Corporate is expected to under-perform the IShares Floating. In addition to that, BMO Short is 3.19 times more volatile than iShares Floating Rate. It trades about -0.08 of its total potential returns per unit of risk. iShares Floating Rate is currently generating about 0.23 per unit of volatility. If you would invest 1,998 in iShares Floating Rate on August 27, 2024 and sell it today you would earn a total of 4.00 from holding iShares Floating Rate or generate 0.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Short Corporate vs. iShares Floating Rate
Performance |
| Timeline |
| BMO Short Corporate |
| iShares Floating Rate |
BMO Short and IShares Floating Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Short and IShares Floating
The main advantage of trading using opposite BMO Short and IShares Floating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Short position performs unexpectedly, IShares 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 IShares Floating will offset losses from the drop in IShares Floating's long position.| BMO Short vs. Mackenzie Canadian Aggregate | BMO Short vs. Mackenzie Core Plus | BMO Short vs. Mackenzie Investment Grade | BMO Short vs. Mackenzie Core Plus |
| IShares Floating vs. Mackenzie Canadian Aggregate | IShares Floating vs. Mackenzie Core Plus | IShares Floating vs. Mackenzie Investment Grade | IShares Floating vs. Mackenzie Core Plus |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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