Correlation Between BMO Aggregate and IShares SP
Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and IShares SP 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 Aggregate and IShares SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Aggregate Bond and iShares SP Mid Cap, you can compare the effects of market volatilities on BMO Aggregate and IShares SP 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 Aggregate with a short position of IShares SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and IShares SP.
Diversification Opportunities for BMO Aggregate and IShares SP
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BMO and IShares is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and iShares SP Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP Mid and BMO Aggregate 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 Aggregate Bond are associated (or correlated) with IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP Mid has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and IShares SP go up and down completely randomly.
Pair Corralation between BMO Aggregate and IShares SP
Assuming the 90 days trading horizon BMO Aggregate is expected to generate 11.71 times less return on investment than IShares SP. But when comparing it to its historical volatility, BMO Aggregate Bond is 4.88 times less risky than IShares SP. It trades about 0.13 of its potential returns per unit of risk. iShares SP Mid Cap is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 2,786 in iShares SP Mid Cap on September 1, 2024 and sell it today you would earn a total of 244.00 from holding iShares SP Mid Cap or generate 8.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
BMO Aggregate Bond vs. iShares SP Mid Cap
Performance |
| Timeline |
| BMO Aggregate Bond |
| iShares SP Mid |
BMO Aggregate and IShares SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Aggregate and IShares SP
The main advantage of trading using opposite BMO Aggregate and IShares SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, IShares SP 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 SP will offset losses from the drop in IShares SP's long position.| BMO Aggregate vs. BMO Short Term Bond | BMO Aggregate vs. BMO Canadian Bank | BMO Aggregate vs. BMO Aggregate Bond | BMO Aggregate vs. BMO Balanced ETF |
| IShares SP vs. iShares Small Cap | IShares SP vs. iShares SP Mid Cap | IShares SP vs. iShares Core SP | IShares SP vs. iShares MSCI Europe |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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