Correlation Between BMO Short and IShares Canadian
Can any of the company-specific risk be diversified away by investing in both BMO Short and IShares Canadian 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 Canadian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Short Provincial and iShares Canadian Real, you can compare the effects of market volatilities on BMO Short and IShares Canadian 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 Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Short and IShares Canadian.
Diversification Opportunities for BMO Short and IShares Canadian
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BMO and IShares is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding BMO Short Provincial and iShares Canadian Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Canadian Real 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 Provincial are associated (or correlated) with IShares Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Canadian Real has no effect on the direction of BMO Short i.e., BMO Short and IShares Canadian go up and down completely randomly.
Pair Corralation between BMO Short and IShares Canadian
Assuming the 90 days trading horizon BMO Short Provincial is expected to generate 0.26 times more return on investment than IShares Canadian. However, BMO Short Provincial is 3.87 times less risky than IShares Canadian. It trades about 0.16 of its potential returns per unit of risk. iShares Canadian Real is currently generating about 0.03 per unit of risk. If you would invest 1,193 in BMO Short Provincial on September 23, 2024 and sell it today you would earn a total of 40.00 from holding BMO Short Provincial or generate 3.35% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
BMO Short Provincial vs. iShares Canadian Real
Performance |
Timeline |
BMO Short Provincial |
iShares Canadian Real |
BMO Short and IShares Canadian Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BMO Short and IShares Canadian
The main advantage of trading using opposite BMO Short and IShares Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Short position performs unexpectedly, IShares Canadian 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 Canadian will offset losses from the drop in IShares Canadian's long position.BMO Short vs. Dynamic Active Crossover | BMO Short vs. Dynamic Active Tactical | BMO Short vs. Dynamic Active Preferred | BMO Short vs. Dynamic Active Canadian |
IShares Canadian vs. BMO Long Corporate | IShares Canadian vs. BMO Short Provincial | IShares Canadian vs. BMO Short Federal | IShares Canadian vs. BMO Emerging Markets |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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