Correlation Between BMO Equal and IShares Global

Can any of the company-specific risk be diversified away by investing in both BMO Equal 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 Equal 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 Equal Weight and iShares Global Real, you can compare the effects of market volatilities on BMO Equal 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 Equal with a short position of IShares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Equal and IShares Global.

Diversification Opportunities for BMO Equal and IShares Global

0.71

Correlation Coefficient

BMO Equal  IShares Global

Poor diversification

The 3 months correlation between BMO and IShares is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding BMO Equal Weight and iShares Global Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Real and BMO Equal 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 Equal Weight 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 Real has no effect on the direction of BMO Equal i.e., BMO Equal and IShares Global go up and down completely randomly.

Pair Corralation between BMO Equal and IShares Global

Assuming the 90 days trading horizon BMO Equal Weight is expected to under-perform the IShares Global. In addition to that, BMO Equal is 1.13 times more volatile than iShares Global Real. It trades about 0.0 of its total potential returns per unit of risk. iShares Global Real is currently generating about 0.03 per unit of volatility. If you would invest  2,680  in iShares Global Real on October 5, 2024 and sell it today you would earn a total of  335.00  from holding iShares Global Real or generate 12.5% return on investment over 90 days.

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

BMO Equal Weight  vs.  iShares Global Real

BMO Equal Weight

Risk-Adjusted Performance

0 of 100

Very Weak

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

iShares Global Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Global Real has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares 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 BMO Equal and IShares Global

The main advantage of trading using opposite BMO Equal and IShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Equal 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 Equal Weight and iShares Global Real 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.