Correlation Between BMO Global and IShares Conservative

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

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

Diversification Opportunities for BMO Global and IShares Conservative

0.66

Correlation Coefficient

BMO Global  IShares Conservative

Poor diversification

The 3 months correlation between BMO and IShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding BMO Global Strategic and iShares Conservative Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Conservative 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 Strategic are associated (or correlated) with IShares Conservative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Conservative has no effect on the direction of BMO Global i.e., BMO Global and IShares Conservative go up and down completely randomly.

Pair Corralation between BMO Global and IShares Conservative

Assuming the 90 days trading horizon BMO Global Strategic is expected to generate 1.94 times more return on investment than IShares Conservative. However, BMO Global is 1.94 times more volatile than iShares Conservative Short. It trades about 0.21 of its potential returns per unit of risk. iShares Conservative Short is currently generating about 0.13 per unit of risk. If you would invest  2,718  in BMO Global Strategic on December 4, 2024 and sell it today you would earn a total of  39.00  from holding BMO Global Strategic or generate 1.43% return on investment over 90 days.

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

BMO Global Strategic  vs.  iShares Conservative Short

BMO Global Strategic

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Global Strategic are ranked lower than 2 (%) 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.

iShares Conservative

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Conservative Short are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy 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.

Pair Trading with BMO Global and IShares Conservative

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

The idea behind BMO Global Strategic and iShares Conservative Short 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.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.