Correlation Between BMO Dividend and IShares Core
Can any of the company-specific risk be diversified away by investing in both BMO Dividend and IShares Core 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 Dividend and IShares Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Dividend CAD and iShares Core MSCI, you can compare the effects of market volatilities on BMO Dividend and IShares Core 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 Dividend with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Dividend and IShares Core.
Diversification Opportunities for BMO Dividend and IShares Core
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 Dividend CAD and iShares Core MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core MSCI and BMO Dividend 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 Dividend CAD are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core MSCI has no effect on the direction of BMO Dividend i.e., BMO Dividend and IShares Core go up and down completely randomly.
Pair Corralation between BMO Dividend and IShares Core
Assuming the 90 days trading horizon BMO Dividend is expected to generate 1.19 times less return on investment than IShares Core. But when comparing it to its historical volatility, BMO Dividend CAD is 1.0 times less risky than IShares Core. It trades about 0.15 of its potential returns per unit of risk. iShares Core MSCI is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 3,168 in iShares Core MSCI on August 26, 2024 and sell it today you would earn a total of 93.00 from holding iShares Core MSCI or generate 2.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Dividend CAD vs. iShares Core MSCI
Performance |
| Timeline |
| BMO Dividend CAD |
| iShares Core MSCI |
BMO Dividend and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Dividend and IShares Core
The main advantage of trading using opposite BMO Dividend and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Dividend position performs unexpectedly, IShares Core 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 Core will offset losses from the drop in IShares Core's long position.| BMO Dividend vs. BMO Europe High | BMO Dividend vs. BMO Covered Call | BMO Dividend vs. BMO Covered Call | BMO Dividend vs. BMO Europe High |
| IShares Core vs. BMO Europe High | IShares Core vs. BMO Covered Call | IShares Core vs. BMO Covered Call | IShares Core vs. BMO Europe High |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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