Correlation Between BMO Short and IShares IG
Can any of the company-specific risk be diversified away by investing in both BMO Short 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 Short 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 Short Term IG and iShares IG Corporate, you can compare the effects of market volatilities on BMO Short 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 Short with a short position of IShares IG. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Short and IShares IG.
Diversification Opportunities for BMO Short and IShares IG
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BMO and IShares is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding BMO Short Term IG 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 Short 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 Short Term IG 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 Short i.e., BMO Short and IShares IG go up and down completely randomly.
Pair Corralation between BMO Short and IShares IG
Assuming the 90 days trading horizon BMO Short Term IG is expected to generate 0.43 times more return on investment than IShares IG. However, BMO Short Term IG is 2.33 times less risky than IShares IG. It trades about 0.08 of its potential returns per unit of risk. iShares IG Corporate is currently generating about 0.03 per unit of risk. If you would invest 1,246 in BMO Short Term IG on August 30, 2024 and sell it today you would earn a total of 91.00 from holding BMO Short Term IG or generate 7.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Short Term IG vs. iShares IG Corporate
Performance |
| Timeline |
| BMO Short Term |
| iShares IG Corporate |
BMO Short and IShares IG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Short and IShares IG
The main advantage of trading using opposite BMO Short and IShares IG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Short 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 Short vs. BMO Mid Term IG | BMO Short vs. BMO Short Provincial | BMO Short vs. BMO Short Federal | BMO Short vs. BMO Floating Rate |
| 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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