Correlation Between IShares IG and BMO Mid
Can any of the company-specific risk be diversified away by investing in both IShares IG and BMO Mid 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 IShares IG and BMO Mid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares IG Corporate and BMO Mid Term IG, you can compare the effects of market volatilities on IShares IG and BMO Mid 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 IShares IG with a short position of BMO Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares IG and BMO Mid.
Diversification Opportunities for IShares IG and BMO Mid
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and BMO is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares IG Corporate and BMO Mid Term IG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Mid Term and IShares IG 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 iShares IG Corporate are associated (or correlated) with BMO Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Mid Term has no effect on the direction of IShares IG i.e., IShares IG and BMO Mid go up and down completely randomly.
Pair Corralation between IShares IG and BMO Mid
Assuming the 90 days trading horizon IShares IG is expected to generate 1.29 times less return on investment than BMO Mid. In addition to that, IShares IG is 1.37 times more volatile than BMO Mid Term IG. It trades about 0.09 of its total potential returns per unit of risk. BMO Mid Term IG is currently generating about 0.15 per unit of volatility. If you would invest 1,265 in BMO Mid Term IG on September 12, 2024 and sell it today you would earn a total of 14.00 from holding BMO Mid Term IG or generate 1.11% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
iShares IG Corporate vs. BMO Mid Term IG
Performance |
Timeline |
iShares IG Corporate |
BMO Mid Term |
IShares IG and BMO Mid Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IShares IG and BMO Mid
The main advantage of trading using opposite IShares IG and BMO Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares IG position performs unexpectedly, BMO Mid 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 BMO Mid will offset losses from the drop in BMO Mid's long position.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 |
BMO Mid vs. BMO Mid Corporate | BMO Mid vs. BMO High Yield | BMO Mid vs. BMO Mid Provincial | BMO Mid vs. BMO Emerging Markets |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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