Correlation Between BMO Global and IShares Global
Can any of the company-specific risk be diversified away by investing in both BMO Global and IShares Global 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 Global and IShares Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Global Infrastructure and iShares Global Infrastructure, you can compare the effects of market volatilities on BMO Global and IShares Global 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 Global with a short position of IShares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Global and IShares Global.
Diversification Opportunities for BMO Global and IShares Global
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BMO and IShares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding BMO Global Infrastructure and iShares Global Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Infra and BMO Global 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 Global Infrastructure are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Infra has no effect on the direction of BMO Global i.e., BMO Global and IShares Global go up and down completely randomly.
Pair Corralation between BMO Global and IShares Global
Assuming the 90 days trading horizon BMO Global is expected to generate 1.16 times less return on investment than IShares Global. But when comparing it to its historical volatility, BMO Global Infrastructure is 1.05 times less risky than IShares Global. It trades about 0.32 of its potential returns per unit of risk. iShares Global Infrastructure is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 4,749 in iShares Global Infrastructure on August 25, 2024 and sell it today you would earn a total of 294.00 from holding iShares Global Infrastructure or generate 6.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
BMO Global Infrastructure vs. iShares Global Infrastructure
Performance |
| Timeline |
| BMO Global Infrastructure |
| iShares Global Infra |
BMO Global and IShares Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Global and IShares Global
The main advantage of trading using opposite BMO Global and IShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Global position performs unexpectedly, IShares Global 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 Global will offset losses from the drop in IShares Global's long position.| BMO Global vs. BMO Equal Weight | BMO Global vs. BMO Low Volatility | BMO Global vs. BMO Equal Weight | BMO Global vs. BMO MSCI Emerging |
| IShares Global vs. iShares Global Real | IShares Global vs. iShares Global Monthly | IShares Global vs. iShares Equal Weight | IShares Global vs. iShares Jantzi Social |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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