Correlation Between BMO Long and IShares Core
Can any of the company-specific risk be diversified away by investing in both BMO Long 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 Long 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 Long Federal and iShares Core Canadian, you can compare the effects of market volatilities on BMO Long 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 Long with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Long and IShares Core.
Diversification Opportunities for BMO Long and IShares Core
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BMO and IShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding BMO Long Federal 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 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 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 Long i.e., BMO Long and IShares Core go up and down completely randomly.
Pair Corralation between BMO Long and IShares Core
Assuming the 90 days trading horizon BMO Long Federal is expected to under-perform the IShares Core. In addition to that, BMO Long is 1.22 times more volatile than iShares Core Canadian. It trades about -0.07 of its total potential returns per unit of risk. iShares Core Canadian is currently generating about -0.04 per unit of volatility. If you would invest 1,920 in iShares Core Canadian on August 25, 2024 and sell it today you would lose (12.00) from holding iShares Core Canadian or give up 0.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Long Federal vs. iShares Core Canadian
Performance |
| Timeline |
| BMO Long Federal |
| iShares Core Canadian |
BMO Long and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Long and IShares Core
The main advantage of trading using opposite BMO Long and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Long 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 Long vs. iShares MSCI Emerging | BMO Long vs. iShares MSCI Global | BMO Long vs. iShares Core Canadian | BMO Long vs. Vanguard Total Market |
| IShares Core vs. iShares Canadian Government | IShares Core vs. iShares Core Canadian | IShares Core vs. iShares Canadian Short | IShares Core vs. iShares Canadian Real |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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