Correlation Between IShares Conservative and BMO Global

Can any of the company-specific risk be diversified away by investing in both IShares Conservative and BMO Global 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 Conservative and BMO Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Conservative Strategic and BMO Global Strategic, you can compare the effects of market volatilities on IShares Conservative and BMO Global 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 Conservative with a short position of BMO Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Conservative and BMO Global.

Diversification Opportunities for IShares Conservative and BMO Global

0.94

Correlation Coefficient

IShares Conservative  BMO Global

Almost no diversification

The 3 months correlation between IShares and BMO is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares Conservative Strategic and BMO Global Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Global Strategic and IShares 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 iShares Conservative Strategic are associated (or correlated) with BMO Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Global Strategic has no effect on the direction of IShares Conservative i.e., IShares Conservative and BMO Global go up and down completely randomly.

Pair Corralation between IShares Conservative and BMO Global

Assuming the 90 days trading horizon iShares Conservative Strategic is expected to generate 0.98 times more return on investment than BMO Global. However, iShares Conservative Strategic is 1.02 times less risky than BMO Global. It trades about 0.08 of its potential returns per unit of risk. BMO Global Strategic is currently generating about 0.05 per unit of risk. If you would invest  1,775  in iShares Conservative Strategic on December 29, 2024 and sell it today you would earn a total of  27.00  from holding iShares Conservative Strategic or generate 1.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

iShares Conservative Strategic  vs.  BMO Global Strategic

iShares Conservative

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Conservative Strategic are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, IShares Conservative is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

BMO Global Strategic

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Global Strategic are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, BMO Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Conservative and BMO Global

The main advantage of trading using opposite IShares Conservative and BMO Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Conservative position performs unexpectedly, BMO Global 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 Global will offset losses from the drop in BMO Global's long position.

The idea behind iShares Conservative Strategic and BMO Global Strategic 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..