Correlation Between BMO Aggregate and IShares Conservative
Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and IShares Conservative 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 Conservative 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 Conservative Strategic, you can compare the effects of market volatilities on BMO Aggregate and IShares Conservative 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 Conservative. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and IShares Conservative.
Diversification Opportunities for BMO Aggregate and IShares Conservative
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BMO and IShares is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and iShares Conservative Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Conservative 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 Conservative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Conservative has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and IShares Conservative go up and down completely randomly.
Pair Corralation between BMO Aggregate and IShares Conservative
Assuming the 90 days trading horizon BMO Aggregate is expected to generate 3.29 times less return on investment than IShares Conservative. But when comparing it to its historical volatility, BMO Aggregate Bond is 1.03 times less risky than IShares Conservative. It trades about 0.02 of its potential returns per unit of risk. iShares Conservative Strategic is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,661 in iShares Conservative Strategic on September 1, 2024 and sell it today you would earn a total of 162.00 from holding iShares Conservative Strategic or generate 9.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.73% |
| Values | Daily Returns |
BMO Aggregate Bond vs. iShares Conservative Strategic
Performance |
| Timeline |
| BMO Aggregate Bond |
| iShares Conservative |
BMO Aggregate and IShares Conservative Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Aggregate and IShares Conservative
The main advantage of trading using opposite BMO Aggregate and IShares Conservative positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, IShares Conservative 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 Conservative will offset losses from the drop in IShares Conservative'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 Conservative vs. iShares Conservative Short | IShares Conservative vs. iShares Short Term | IShares Conservative vs. iShares IG Corporate | IShares Conservative vs. iShares Floating Rate |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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