Correlation Between BMO Long and IShares Canadian
Can any of the company-specific risk be diversified away by investing in both BMO Long and IShares Canadian 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 Long and IShares Canadian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Long Corporate and iShares Canadian HYBrid, you can compare the effects of market volatilities on BMO Long and IShares Canadian 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 Long with a short position of IShares Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Long and IShares Canadian.
Diversification Opportunities for BMO Long and IShares Canadian
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BMO and IShares is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding BMO Long Corporate and iShares Canadian HYBrid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Canadian HYBrid and BMO Long 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 Long Corporate are associated (or correlated) with IShares Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Canadian HYBrid has no effect on the direction of BMO Long i.e., BMO Long and IShares Canadian go up and down completely randomly.
Pair Corralation between BMO Long and IShares Canadian
Assuming the 90 days trading horizon BMO Long Corporate is expected to under-perform the IShares Canadian. In addition to that, BMO Long is 2.4 times more volatile than iShares Canadian HYBrid. It trades about -0.31 of its total potential returns per unit of risk. iShares Canadian HYBrid is currently generating about -0.25 per unit of volatility. If you would invest 1,986 in iShares Canadian HYBrid on October 14, 2024 and sell it today you would lose (23.00) from holding iShares Canadian HYBrid or give up 1.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Long Corporate vs. iShares Canadian HYBrid
Performance |
| Timeline |
| BMO Long Corporate |
| iShares Canadian HYBrid |
BMO Long and IShares Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Long and IShares Canadian
The main advantage of trading using opposite BMO Long and IShares Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Long position performs unexpectedly, IShares Canadian 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 Canadian will offset losses from the drop in IShares Canadian's long position.| BMO Long vs. BMO Mid Corporate | BMO Long vs. BMO Short Corporate | BMO Long vs. BMO High Yield | BMO Long vs. BMO Long Provincial |
| IShares Canadian vs. iShares IG Corporate | IShares Canadian vs. iShares High Yield | IShares Canadian vs. iShares Floating Rate | IShares Canadian vs. iShares JP Morgan |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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