Correlation Between BMO Global and IShares Global

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

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

Diversification Opportunities for BMO Global and IShares Global

-0.87

Correlation Coefficient

BMO Global  IShares Global

Pay attention - limited upside

The 3 months correlation between BMO and IShares is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding BMO Global Infrastructure and iShares Global Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Healthcare and BMO Global 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 Global Infrastructure are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Healthcare has no effect on the direction of BMO Global i.e., BMO Global and IShares Global go up and down completely randomly.

Pair Corralation between BMO Global and IShares Global

Assuming the 90 days trading horizon BMO Global Infrastructure is expected to generate 1.13 times more return on investment than IShares Global. However, BMO Global is 1.13 times more volatile than iShares Global Healthcare. It trades about 0.28 of its potential returns per unit of risk. iShares Global Healthcare is currently generating about -0.19 per unit of risk. If you would invest  4,809  in BMO Global Infrastructure on August 31, 2024 and sell it today you would earn a total of  603.00  from holding BMO Global Infrastructure or generate 12.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

BMO Global Infrastructure  vs.  iShares Global Healthcare

BMO Global Infrastructure

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Global Infrastructure are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, BMO Global may actually be approaching a critical reversion point that can send shares even higher in December 2024.

iShares Global Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Global Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with BMO Global and IShares Global

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

The idea behind BMO Global Infrastructure and iShares Global Healthcare 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.