Correlation Between BMO Equal and IShares Core
Can any of the company-specific risk be diversified away by investing in both BMO Equal and IShares Core 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 Equal and IShares Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Equal Weight and iShares Core Canadian, you can compare the effects of market volatilities on BMO Equal and IShares Core 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 Equal with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Equal and IShares Core.
Diversification Opportunities for BMO Equal and IShares Core
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between BMO and IShares is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding BMO Equal Weight and iShares Core Canadian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Canadian and BMO Equal 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 Equal Weight are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core Canadian has no effect on the direction of BMO Equal i.e., BMO Equal and IShares Core go up and down completely randomly.
Pair Corralation between BMO Equal and IShares Core
Assuming the 90 days trading horizon BMO Equal Weight is expected to generate 1.1 times more return on investment than IShares Core. However, BMO Equal is 1.1 times more volatile than iShares Core Canadian. It trades about 0.08 of its potential returns per unit of risk. iShares Core Canadian is currently generating about 0.02 per unit of risk. If you would invest 6,214 in BMO Equal Weight on August 29, 2024 and sell it today you would earn a total of 1,379 from holding BMO Equal Weight or generate 22.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
BMO Equal Weight vs. iShares Core Canadian
Performance |
| Timeline |
| BMO Equal Weight |
| iShares Core Canadian |
BMO Equal and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Equal and IShares Core
The main advantage of trading using opposite BMO Equal and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Equal position performs unexpectedly, IShares Core 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 Core will offset losses from the drop in IShares Core's long position.| BMO Equal vs. iShares SPTSX Capped | BMO Equal vs. BMO Equal Weight | BMO Equal vs. BMO SPTSX Equal | BMO Equal vs. BMO Equal Weight |
| IShares Core vs. iShares MSCI Emerging | IShares Core vs. iShares MSCI Global | IShares Core vs. iShares Core Canadian | IShares Core vs. Vanguard Total Market |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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