Correlation Between BMO Long and IShares High
Can any of the company-specific risk be diversified away by investing in both BMO Long and IShares High 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 High 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 High Yield, you can compare the effects of market volatilities on BMO Long and IShares High 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 High. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Long and IShares High.
Diversification Opportunities for BMO Long and IShares High
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BMO and IShares is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding BMO Long Corporate and iShares High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares High Yield 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 High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares High Yield has no effect on the direction of BMO Long i.e., BMO Long and IShares High go up and down completely randomly.
Pair Corralation between BMO Long and IShares High
Assuming the 90 days trading horizon BMO Long is expected to generate 1.12 times less return on investment than IShares High. In addition to that, BMO Long is 1.53 times more volatile than iShares High Yield. It trades about 0.04 of its total potential returns per unit of risk. iShares High Yield is currently generating about 0.07 per unit of volatility. If you would invest 1,457 in iShares High Yield on September 3, 2024 and sell it today you would earn a total of 243.00 from holding iShares High Yield or generate 16.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Long Corporate vs. iShares High Yield
Performance |
| Timeline |
| BMO Long Corporate |
| iShares High Yield |
BMO Long and IShares High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Long and IShares High
The main advantage of trading using opposite BMO Long and IShares High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Long position performs unexpectedly, IShares High 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 High will offset losses from the drop in IShares High'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 Emerging Markets |
| IShares High vs. iShares IG Corporate | IShares High vs. iShares Canadian HYBrid | IShares High vs. iShares Core Canadian | IShares High vs. iShares 1 5 Year |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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