Correlation Between BMO Dow and IShares High
Can any of the company-specific risk be diversified away by investing in both BMO Dow and IShares High 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 Dow and IShares High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Dow Jones and iShares High Dividend, you can compare the effects of market volatilities on BMO Dow and IShares High 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 Dow with a short position of IShares High. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Dow and IShares High.
Diversification Opportunities for BMO Dow and IShares High
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BMO and IShares is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding BMO Dow Jones and iShares High Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares High Dividend and BMO Dow 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 Dow Jones are associated (or correlated) with IShares High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares High Dividend has no effect on the direction of BMO Dow i.e., BMO Dow and IShares High go up and down completely randomly.
Pair Corralation between BMO Dow and IShares High
Assuming the 90 days trading horizon BMO Dow Jones is expected to generate 1.51 times more return on investment than IShares High. However, BMO Dow is 1.51 times more volatile than iShares High Dividend. It trades about 0.33 of its potential returns per unit of risk. iShares High Dividend is currently generating about 0.21 per unit of risk. If you would invest 6,469 in BMO Dow Jones on September 1, 2024 and sell it today you would earn a total of 468.00 from holding BMO Dow Jones or generate 7.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Dow Jones vs. iShares High Dividend
Performance |
| Timeline |
| BMO Dow Jones |
| iShares High Dividend |
BMO Dow and IShares High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Dow and IShares High
The main advantage of trading using opposite BMO Dow and IShares High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Dow position performs unexpectedly, IShares High 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 High will offset losses from the drop in IShares High's long position.| BMO Dow vs. BMO SP 500 | BMO Dow vs. BMO NASDAQ 100 | BMO Dow vs. BMO Equal Weight | BMO Dow vs. BMO Equal Weight |
| IShares High vs. Vanguard Dividend Appreciation | IShares High vs. Vanguard Total Market | IShares High vs. Vanguard FTSE Emerging | IShares High vs. Vanguard FTSE Global |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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