Correlation Between BMO Global and IShares ESG
Can any of the company-specific risk be diversified away by investing in both BMO Global 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 Global 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 Global Infrastructure and iShares ESG Aware, you can compare the effects of market volatilities on BMO Global 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 Global with a short position of IShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Global and IShares ESG.
Diversification Opportunities for BMO Global and IShares ESG
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BMO and IShares is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding BMO Global Infrastructure and iShares ESG Aware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Aware 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 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 Aware has no effect on the direction of BMO Global i.e., BMO Global and IShares ESG go up and down completely randomly.
Pair Corralation between BMO Global and IShares ESG
Assuming the 90 days trading horizon BMO Global Infrastructure is expected to generate 1.03 times more return on investment than IShares ESG. However, BMO Global is 1.03 times more volatile than iShares ESG Aware. It trades about 0.47 of its potential returns per unit of risk. iShares ESG Aware is currently generating about -0.17 per unit of risk. If you would invest 5,033 in BMO Global Infrastructure on August 30, 2024 and sell it today you would earn a total of 389.00 from holding BMO Global Infrastructure or generate 7.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
BMO Global Infrastructure vs. iShares ESG Aware
Performance |
| Timeline |
| BMO Global Infrastructure |
| iShares ESG Aware |
BMO Global and IShares ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Global and IShares ESG
The main advantage of trading using opposite BMO Global and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Global 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 Global vs. BMO Equal Weight | BMO Global vs. BMO Low Volatility | BMO Global vs. BMO Equal Weight | BMO Global vs. BMO MSCI Emerging |
| IShares ESG vs. iShares ESG MSCI | IShares ESG vs. iShares ESG Aware | IShares ESG vs. iShares ESG Aware | IShares ESG vs. iShares ESG Aware |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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