Correlation Between BMO Equal and IShares SP
Can any of the company-specific risk be diversified away by investing in both BMO Equal 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 Equal 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 Equal Weight and iShares SP Global, you can compare the effects of market volatilities on BMO Equal 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 Equal with a short position of IShares SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Equal and IShares SP.
Diversification Opportunities for BMO Equal and IShares SP
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 Equal Weight and iShares SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP Global and BMO Equal 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 Equal Weight 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 Global has no effect on the direction of BMO Equal i.e., BMO Equal and IShares SP go up and down completely randomly.
Pair Corralation between BMO Equal and IShares SP
Assuming the 90 days trading horizon BMO Equal is expected to generate 1.99 times less return on investment than IShares SP. In addition to that, BMO Equal is 1.31 times more volatile than iShares SP Global. It trades about 0.04 of its total potential returns per unit of risk. iShares SP Global is currently generating about 0.11 per unit of volatility. If you would invest 4,354 in iShares SP Global on September 3, 2024 and sell it today you would earn a total of 1,402 from holding iShares SP Global or generate 32.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Equal Weight vs. iShares SP Global
Performance |
| Timeline |
| BMO Equal Weight |
| iShares SP Global |
BMO Equal and IShares SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Equal and IShares SP
The main advantage of trading using opposite BMO Equal and IShares SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Equal 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 Equal vs. International Zeolite Corp | BMO Equal vs. European Residential Real | BMO Equal vs. Financial 15 Split | BMO Equal vs. Rubicon Organics |
| IShares SP vs. iShares SP Global | IShares SP vs. iShares Global Healthcare | IShares SP vs. iShares Global Infrastructure | IShares SP vs. iShares SPTSX Capped |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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