Correlation Between BMO Growth and IA Clarington
Can any of the company-specific risk be diversified away by investing in both BMO Growth and IA Clarington 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 Growth and IA Clarington into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Growth ETF and IA Clarington Core, you can compare the effects of market volatilities on BMO Growth and IA Clarington 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 Growth with a short position of IA Clarington. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Growth and IA Clarington.
Diversification Opportunities for BMO Growth and IA Clarington
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BMO and ICPB is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding BMO Growth ETF and IA Clarington Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IA Clarington Core and BMO Growth 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 Growth ETF are associated (or correlated) with IA Clarington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IA Clarington Core has no effect on the direction of BMO Growth i.e., BMO Growth and IA Clarington go up and down completely randomly.
Pair Corralation between BMO Growth and IA Clarington
Assuming the 90 days trading horizon BMO Growth ETF is expected to generate 1.5 times more return on investment than IA Clarington. However, BMO Growth is 1.5 times more volatile than IA Clarington Core. It trades about 0.18 of its potential returns per unit of risk. IA Clarington Core is currently generating about 0.09 per unit of risk. If you would invest 3,705 in BMO Growth ETF on August 25, 2024 and sell it today you would earn a total of 879.00 from holding BMO Growth ETF or generate 23.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Growth ETF vs. IA Clarington Core
Performance |
| Timeline |
| BMO Growth ETF |
| IA Clarington Core |
BMO Growth and IA Clarington Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Growth and IA Clarington
The main advantage of trading using opposite BMO Growth and IA Clarington positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Growth position performs unexpectedly, IA Clarington 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 IA Clarington will offset losses from the drop in IA Clarington's long position.| BMO Growth vs. IA Clarington Core | BMO Growth vs. IA Clarington Floating | BMO Growth vs. IA Clarington Strategic | BMO Growth vs. Purpose Global Bond |
| IA Clarington vs. Mackenzie Canadian Aggregate | IA Clarington vs. Mackenzie Canadian Short | IA Clarington vs. Mackenzie Core Plus | IA Clarington vs. Mackenzie Investment Grade |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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