Correlation Between Bitcoin ETF and BMO MSCI

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

By analyzing existing cross correlation between Bitcoin ETF CAD and BMO MSCI EAFE, you can compare the effects of market volatilities on Bitcoin ETF and BMO MSCI 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 Bitcoin ETF with a short position of BMO MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bitcoin ETF and BMO MSCI.

Diversification Opportunities for Bitcoin ETF and BMO MSCI

-0.54

Correlation Coefficient

Bitcoin ETF  BMO MSCI

Excellent diversification

The 3 months correlation between Bitcoin and BMO is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin ETF CAD and BMO MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO MSCI EAFE and Bitcoin ETF 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 Bitcoin ETF CAD are associated (or correlated) with BMO MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO MSCI EAFE has no effect on the direction of Bitcoin ETF i.e., Bitcoin ETF and BMO MSCI go up and down completely randomly.

Pair Corralation between Bitcoin ETF and BMO MSCI

Assuming the 90 days trading horizon Bitcoin ETF CAD is expected to generate 4.95 times more return on investment than BMO MSCI. However, Bitcoin ETF is 4.95 times more volatile than BMO MSCI EAFE. It trades about 0.3 of its potential returns per unit of risk. BMO MSCI EAFE is currently generating about -0.01 per unit of risk. If you would invest  2,830  in Bitcoin ETF CAD on September 16, 2024 and sell it today you would earn a total of  2,346  from holding Bitcoin ETF CAD or generate 82.9% return on investment over 90 days.

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

Bitcoin ETF CAD  vs.  BMO MSCI EAFE

Bitcoin ETF CAD

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin ETF CAD are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Bitcoin ETF displayed solid returns over the last few months and may actually be approaching a breakup point.

BMO MSCI EAFE

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Bitcoin ETF and BMO MSCI

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

The idea behind Bitcoin ETF CAD and BMO MSCI EAFE 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.