Correlation Between BMO SP and IShares IG
Can any of the company-specific risk be diversified away by investing in both BMO SP and IShares IG 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 SP and IShares IG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO SP 500 and iShares IG Corporate, you can compare the effects of market volatilities on BMO SP and IShares IG 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 SP with a short position of IShares IG. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SP and IShares IG.
Diversification Opportunities for BMO SP and IShares IG
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between BMO and IShares is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding BMO SP 500 and iShares IG Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares IG Corporate and BMO SP 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 SP 500 are associated (or correlated) with IShares IG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares IG Corporate has no effect on the direction of BMO SP i.e., BMO SP and IShares IG go up and down completely randomly.
Pair Corralation between BMO SP and IShares IG
Assuming the 90 days trading horizon BMO SP 500 is expected to generate 1.91 times more return on investment than IShares IG. However, BMO SP is 1.91 times more volatile than iShares IG Corporate. It trades about 0.16 of its potential returns per unit of risk. iShares IG Corporate is currently generating about 0.08 per unit of risk. If you would invest 7,834 in BMO SP 500 on August 29, 2024 and sell it today you would earn a total of 1,370 from holding BMO SP 500 or generate 17.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO SP 500 vs. iShares IG Corporate
Performance |
| Timeline |
| BMO SP 500 |
| iShares IG Corporate |
BMO SP and IShares IG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO SP and IShares IG
The main advantage of trading using opposite BMO SP and IShares IG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO SP position performs unexpectedly, IShares IG 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 IG will offset losses from the drop in IShares IG's long position.| BMO SP vs. BMO SPTSX Capped | BMO SP vs. BMO NASDAQ 100 | BMO SP vs. iShares Core SP | BMO SP vs. Vanguard SP 500 |
| IShares IG vs. iShares JP Morgan | IShares IG vs. iShares High Yield | IShares IG vs. iShares 1 10Yr Laddered | IShares IG vs. iShares Canadian HYBrid |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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