Correlation Between BMO Conservative and IShares Core

Can any of the company-specific risk be diversified away by investing in both BMO Conservative 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 Conservative 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 Conservative ETF and iShares Core Conservative, you can compare the effects of market volatilities on BMO Conservative 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 Conservative with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Conservative and IShares Core.

Diversification Opportunities for BMO Conservative and IShares Core

0.95

Correlation Coefficient

BMO Conservative  IShares Core

Almost no diversification

The 3 months correlation between BMO and IShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding BMO Conservative ETF and iShares Core Conservative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Conservative and BMO Conservative 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 Conservative ETF 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 Conservative has no effect on the direction of BMO Conservative i.e., BMO Conservative and IShares Core go up and down completely randomly.

Pair Corralation between BMO Conservative and IShares Core

Assuming the 90 days trading horizon BMO Conservative is expected to generate 1.3 times less return on investment than IShares Core. In addition to that, BMO Conservative is 1.33 times more volatile than iShares Core Conservative. It trades about 0.11 of its total potential returns per unit of risk. iShares Core Conservative is currently generating about 0.18 per unit of volatility. If you would invest  2,310  in iShares Core Conservative on September 13, 2024 and sell it today you would earn a total of  79.00  from holding iShares Core Conservative or generate 3.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

BMO Conservative ETF  vs.  iShares Core Conservative

BMO Conservative ETF

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Conservative ETF are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, BMO Conservative is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares Core Conservative

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core Conservative are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Core is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BMO Conservative and IShares Core

The main advantage of trading using opposite BMO Conservative and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Conservative 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.

The idea behind BMO Conservative ETF and iShares Core Conservative pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.