Correlation Between IShares Global and BMO Equal

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

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

Diversification Opportunities for IShares Global and BMO Equal

0.86

Correlation Coefficient

IShares Global  BMO Equal

Very poor diversification

The 3 months correlation between IShares and BMO is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Water and BMO Equal Weight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Equal Weight and IShares 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 iShares Global Water are associated (or correlated) with BMO Equal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Equal Weight has no effect on the direction of IShares Global i.e., IShares Global and BMO Equal go up and down completely randomly.

Pair Corralation between IShares Global and BMO Equal

Assuming the 90 days trading horizon iShares Global Water is expected to generate about the same return on investment as BMO Equal Weight. However, IShares Global is 1.32 times more volatile than BMO Equal Weight. It trades about 0.25 of its potential returns per unit of risk. BMO Equal Weight is currently producing about 0.33 per unit of risk. If you would invest  2,211  in BMO Equal Weight on April 20, 2025 and sell it today you would earn a total of  261.00  from holding BMO Equal Weight or generate 11.8% return on investment over 90 days.

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

iShares Global Water  vs.  BMO Equal Weight

iShares Global Water

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Water are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares Global may actually be approaching a critical reversion point that can send shares even higher in August 2025.

BMO Equal Weight

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Equal Weight are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO Equal may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with IShares Global and BMO Equal

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

The idea behind iShares Global Water and BMO Equal Weight 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.