Correlation Between BMO Long and IShares ESG
Can any of the company-specific risk be diversified away by investing in both BMO Long and IShares ESG 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 Long and IShares ESG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Long Federal and iShares ESG Advanced, you can compare the effects of market volatilities on BMO Long and IShares ESG 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 Long with a short position of IShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Long and IShares ESG.
Diversification Opportunities for BMO Long and IShares ESG
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between BMO and IShares is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding BMO Long Federal and iShares ESG Advanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Advanced and BMO Long 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 Long Federal are associated (or correlated) with IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Advanced has no effect on the direction of BMO Long i.e., BMO Long and IShares ESG go up and down completely randomly.
Pair Corralation between BMO Long and IShares ESG
Assuming the 90 days trading horizon BMO Long is expected to generate 5.56 times less return on investment than IShares ESG. In addition to that, BMO Long is 1.4 times more volatile than iShares ESG Advanced. It trades about 0.01 of its total potential returns per unit of risk. iShares ESG Advanced is currently generating about 0.11 per unit of volatility. If you would invest 5,252 in iShares ESG Advanced on September 12, 2024 and sell it today you would earn a total of 2,515 from holding iShares ESG Advanced or generate 47.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Long Federal vs. iShares ESG Advanced
Performance |
| Timeline |
| BMO Long Federal |
| iShares ESG Advanced |
BMO Long and IShares ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Long and IShares ESG
The main advantage of trading using opposite BMO Long and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Long position performs unexpectedly, IShares ESG 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 ESG will offset losses from the drop in IShares ESG's long position.| BMO Long vs. iShares MSCI Emerging | BMO Long vs. iShares MSCI Global | BMO Long vs. iShares Core Canadian | BMO Long vs. Vanguard Total Market |
| IShares ESG vs. iShares SPTSX 60 | IShares ESG vs. iShares Core SPTSX | IShares ESG vs. BMO SPTSX Capped | IShares ESG vs. Vanguard FTSE Canada |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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