Correlation Between IShares Canadian and BMO Aggregate
Can any of the company-specific risk be diversified away by investing in both IShares Canadian and BMO Aggregate 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 Canadian and BMO Aggregate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Canadian Real and BMO Aggregate Bond, you can compare the effects of market volatilities on IShares Canadian and BMO Aggregate 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 Canadian with a short position of BMO Aggregate. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Canadian and BMO Aggregate.
Diversification Opportunities for IShares Canadian and BMO Aggregate
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and BMO is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian Real and BMO Aggregate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Aggregate Bond and IShares Canadian 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 Canadian Real are associated (or correlated) with BMO Aggregate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Aggregate Bond has no effect on the direction of IShares Canadian i.e., IShares Canadian and BMO Aggregate go up and down completely randomly.
Pair Corralation between IShares Canadian and BMO Aggregate
Assuming the 90 days trading horizon IShares Canadian is expected to generate 1.02 times less return on investment than BMO Aggregate. In addition to that, IShares Canadian is 1.29 times more volatile than BMO Aggregate Bond. It trades about 0.07 of its total potential returns per unit of risk. BMO Aggregate Bond is currently generating about 0.1 per unit of volatility. If you would invest 1,405 in BMO Aggregate Bond on December 5, 2024 and sell it today you would earn a total of 11.00 from holding BMO Aggregate Bond or generate 0.78% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
iShares Canadian Real vs. BMO Aggregate Bond
Performance |
Timeline |
iShares Canadian Real |
BMO Aggregate Bond |
IShares Canadian and BMO Aggregate Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IShares Canadian and BMO Aggregate
The main advantage of trading using opposite IShares Canadian and BMO Aggregate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Canadian position performs unexpectedly, BMO Aggregate 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 Aggregate will offset losses from the drop in BMO Aggregate's long position.IShares Canadian vs. iShares Canadian Short | IShares Canadian vs. iShares Canadian Government | IShares Canadian vs. iShares Core Canadian | IShares Canadian vs. iShares Core Canadian |
BMO Aggregate vs. iShares Core MSCI | BMO Aggregate vs. Vanguard FTSE Canada | BMO Aggregate vs. Vanguard Canadian Aggregate | BMO Aggregate vs. iShares Core MSCI |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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