Correlation Between BMO Short and IShares ESG
Can any of the company-specific risk be diversified away by investing in both BMO Short and IShares ESG 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 Short and IShares ESG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Short Corporate and iShares ESG Aware, you can compare the effects of market volatilities on BMO Short and IShares ESG 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 Short with a short position of IShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Short and IShares ESG.
Diversification Opportunities for BMO Short and IShares ESG
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BMO and IShares is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding BMO Short Corporate and iShares ESG Aware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Aware and BMO Short 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 Short Corporate are associated (or correlated) with IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Aware has no effect on the direction of BMO Short i.e., BMO Short and IShares ESG go up and down completely randomly.
Pair Corralation between BMO Short and IShares ESG
Assuming the 90 days trading horizon BMO Short is expected to generate 1.21 times less return on investment than IShares ESG. In addition to that, BMO Short is 1.07 times more volatile than iShares ESG Aware. It trades about 0.11 of its total potential returns per unit of risk. iShares ESG Aware is currently generating about 0.15 per unit of volatility. If you would invest 1,983 in iShares ESG Aware on December 5, 2024 and sell it today you would earn a total of 9.00 from holding iShares ESG Aware or generate 0.45% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 95.45% |
Values | Daily Returns |
BMO Short Corporate vs. iShares ESG Aware
Performance |
Timeline |
BMO Short Corporate |
iShares ESG Aware |
BMO Short and IShares ESG Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BMO Short and IShares ESG
The main advantage of trading using opposite BMO Short and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Short position performs unexpectedly, IShares ESG 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 ESG will offset losses from the drop in IShares ESG's long position.BMO Short vs. BMO Long Federal | BMO Short vs. BMO Mid Federal | BMO Short vs. BMO Mid Corporate | BMO Short vs. BMO High Yield |
IShares ESG vs. iShares ESG Aware | IShares ESG vs. iShares ESG Aware | IShares ESG vs. iShares ESG Aware | IShares ESG vs. iShares ESG 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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