Correlation Between BMO Discount and IShares Canadian
Can any of the company-specific risk be diversified away by investing in both BMO Discount and IShares Canadian 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 Discount and IShares Canadian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Discount Bond and iShares Canadian Government, you can compare the effects of market volatilities on BMO Discount and IShares Canadian 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 Discount with a short position of IShares Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Discount and IShares Canadian.
Diversification Opportunities for BMO Discount and IShares Canadian
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between BMO and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding BMO Discount Bond and iShares Canadian Government in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Canadian Gov and BMO Discount 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 Discount Bond are associated (or correlated) with IShares Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Canadian Gov has no effect on the direction of BMO Discount i.e., BMO Discount and IShares Canadian go up and down completely randomly.
Pair Corralation between BMO Discount and IShares Canadian
Assuming the 90 days trading horizon BMO Discount is expected to generate 1.08 times less return on investment than IShares Canadian. But when comparing it to its historical volatility, BMO Discount Bond is 1.06 times less risky than IShares Canadian. It trades about 0.12 of its potential returns per unit of risk. iShares Canadian Government is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,941 in iShares Canadian Government on November 2, 2024 and sell it today you would earn a total of 19.00 from holding iShares Canadian Government or generate 0.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
BMO Discount Bond vs. iShares Canadian Government
Performance |
| Timeline |
| BMO Discount Bond |
| iShares Canadian Gov |
BMO Discount and IShares Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Discount and IShares Canadian
The main advantage of trading using opposite BMO Discount and IShares Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Discount position performs unexpectedly, IShares Canadian 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 Canadian will offset losses from the drop in IShares Canadian's long position.| BMO Discount vs. Vanguard Canadian Short | BMO Discount vs. BMO Aggregate Bond | BMO Discount vs. BMO Short Corporate | BMO Discount vs. CI 1 5 Year |
| IShares Canadian vs. iShares Core Canadian | IShares Canadian vs. iShares Core Canadian | IShares Canadian vs. iShares Canadian Real | IShares Canadian vs. iShares Canadian Value |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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