Correlation Between BMO Mid and IShares Canadian
Can any of the company-specific risk be diversified away by investing in both BMO Mid 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 Mid 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 Mid Provincial and iShares Canadian Universe, you can compare the effects of market volatilities on BMO Mid 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 Mid with a short position of IShares Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Mid and IShares Canadian.
Diversification Opportunities for BMO Mid and IShares Canadian
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BMO and IShares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding BMO Mid Provincial and iShares Canadian Universe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Canadian Universe and BMO Mid 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 Mid Provincial 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 Universe has no effect on the direction of BMO Mid i.e., BMO Mid and IShares Canadian go up and down completely randomly.
Pair Corralation between BMO Mid and IShares Canadian
Assuming the 90 days trading horizon BMO Mid Provincial is expected to generate 0.99 times more return on investment than IShares Canadian. However, BMO Mid Provincial is 1.01 times less risky than IShares Canadian. It trades about 0.09 of its potential returns per unit of risk. iShares Canadian Universe is currently generating about 0.08 per unit of risk. If you would invest 1,305 in BMO Mid Provincial on November 3, 2024 and sell it today you would earn a total of 107.00 from holding BMO Mid Provincial or generate 8.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Mid Provincial vs. iShares Canadian Universe
Performance |
| Timeline |
| BMO Mid Provincial |
| iShares Canadian Universe |
BMO Mid and IShares Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Mid and IShares Canadian
The main advantage of trading using opposite BMO Mid and IShares Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Mid 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 Mid vs. BMO Long Federal | BMO Mid vs. BMO Long Provincial | BMO Mid vs. Wealthsimple Developed Markets | BMO Mid vs. Wealthsimple North America |
| IShares Canadian vs. iShares Canadian Short | IShares Canadian vs. iShares MSCI EAFE | IShares Canadian vs. iShares Core Canadian | IShares Canadian vs. iShares Canadian Real |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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