Correlation Between BMO High and IShares High

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

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

Diversification Opportunities for BMO High and IShares High

0.37

Correlation Coefficient

BMO High  IShares High

Weak diversification

The 3 months correlation between BMO and IShares is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding BMO High Dividend and iShares High Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares High Dividend and BMO High 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 High Dividend are associated (or correlated) with IShares High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares High Dividend has no effect on the direction of BMO High i.e., BMO High and IShares High go up and down completely randomly.

Pair Corralation between BMO High and IShares High

Assuming the 90 days trading horizon BMO High Dividend is expected to under-perform the IShares High. But the etf apears to be less risky and, when comparing its historical volatility, BMO High Dividend is 1.06 times less risky than IShares High. The etf trades about -0.01 of its potential returns per unit of risk. The iShares High Dividend is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,260  in iShares High Dividend on December 29, 2024 and sell it today you would earn a total of  234.00  from holding iShares High Dividend or generate 7.18% return on investment over 90 days.

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

BMO High Dividend  vs.  iShares High Dividend

BMO High Dividend

Risk-Adjusted Performance

Very Weak

Over the last 90 days BMO High Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, BMO High is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares High Dividend

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares High Dividend are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares High may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with BMO High and IShares High

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

The idea behind BMO High Dividend and iShares High Dividend 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.