Correlation Between BMO High and IShares JP
Can any of the company-specific risk be diversified away by investing in both BMO High and IShares JP 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 High and IShares JP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO High Yield and iShares JP Morgan, you can compare the effects of market volatilities on BMO High and IShares JP 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 High with a short position of IShares JP. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO High and IShares JP.
Diversification Opportunities for BMO High and IShares JP
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BMO and IShares is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding BMO High Yield and iShares JP Morgan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares JP Morgan and BMO High 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 High Yield are associated (or correlated) with IShares JP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares JP Morgan has no effect on the direction of BMO High i.e., BMO High and IShares JP go up and down completely randomly.
Pair Corralation between BMO High and IShares JP
Assuming the 90 days trading horizon BMO High Yield is expected to generate 0.8 times more return on investment than IShares JP. However, BMO High Yield is 1.25 times less risky than IShares JP. It trades about 0.12 of its potential returns per unit of risk. iShares JP Morgan is currently generating about 0.08 per unit of risk. If you would invest 1,027 in BMO High Yield on September 4, 2024 and sell it today you would earn a total of 107.00 from holding BMO High Yield or generate 10.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO High Yield vs. iShares JP Morgan
Performance |
| Timeline |
| BMO High Yield |
| iShares JP Morgan |
BMO High and IShares JP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO High and IShares JP
The main advantage of trading using opposite BMO High and IShares JP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO High position performs unexpectedly, IShares JP 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 JP will offset losses from the drop in IShares JP's long position.| BMO High vs. iShares 1 10Yr Laddered | BMO High vs. CI Canadian Convertible | BMO High vs. iShares Floating Rate | BMO High vs. iShares JP Morgan |
| IShares JP vs. BMO High Yield | IShares JP vs. BMO Mid Corporate | IShares JP vs. BMO Long Corporate | IShares JP vs. BMO Short Provincial |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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