Correlation Between BMO High and IShares Convertible
Can any of the company-specific risk be diversified away by investing in both BMO High and IShares Convertible 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 Convertible 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 Convertible Bond, you can compare the effects of market volatilities on BMO High and IShares Convertible 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 Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO High and IShares Convertible.
Diversification Opportunities for BMO High and IShares Convertible
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BMO and IShares is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding BMO High Yield and iShares Convertible Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Convertible Bond 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 Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Convertible Bond has no effect on the direction of BMO High i.e., BMO High and IShares Convertible go up and down completely randomly.
Pair Corralation between BMO High and IShares Convertible
Assuming the 90 days trading horizon BMO High Yield is expected to generate 0.57 times more return on investment than IShares Convertible. However, BMO High Yield is 1.77 times less risky than IShares Convertible. It trades about 0.25 of its potential returns per unit of risk. iShares Convertible Bond is currently generating about 0.1 per unit of risk. If you would invest 1,742 in BMO High Yield on August 29, 2024 and sell it today you would earn a total of 165.00 from holding BMO High Yield or generate 9.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO High Yield vs. iShares Convertible Bond
Performance |
| Timeline |
| BMO High Yield |
| iShares Convertible Bond |
BMO High and IShares Convertible Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO High and IShares Convertible
The main advantage of trading using opposite BMO High and IShares Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO High position performs unexpectedly, IShares Convertible 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 Convertible will offset losses from the drop in IShares Convertible's long position.| BMO High vs. BMO High Yield | BMO High vs. BMO Preferred Share | BMO High vs. BMO Preferred Share | BMO High vs. BMO Europe High |
| IShares Convertible vs. Purpose Monthly Income | IShares Convertible vs. Purpose Core Dividend | IShares Convertible vs. Purpose Tactical Hedged | IShares Convertible vs. Purpose Best Ideas |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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