Correlation Between Global Dividend and BMO MSCI

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

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

Diversification Opportunities for Global Dividend and BMO MSCI

-0.31

Correlation Coefficient

Global Dividend  BMO MSCI

Very good diversification

The 3 months correlation between Global and BMO is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Global Dividend Growth 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 Global Dividend 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 Global Dividend Growth 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 Global Dividend i.e., Global Dividend and BMO MSCI go up and down completely randomly.

Pair Corralation between Global Dividend and BMO MSCI

Assuming the 90 days trading horizon Global Dividend Growth is expected to generate 1.42 times more return on investment than BMO MSCI. However, Global Dividend is 1.42 times more volatile than BMO MSCI EAFE. It trades about 0.25 of its potential returns per unit of risk. BMO MSCI EAFE is currently generating about 0.05 per unit of risk. If you would invest  1,032  in Global Dividend Growth on September 13, 2024 and sell it today you would earn a total of  166.00  from holding Global Dividend Growth or generate 16.09% return on investment over 90 days.

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

Global Dividend Growth  vs.  BMO MSCI EAFE

Global Dividend Growth

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global Dividend Growth are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Global Dividend displayed solid returns over the last few months and may actually be approaching a breakup point.

BMO MSCI EAFE

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BMO MSCI EAFE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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 Global Dividend and BMO MSCI

The main advantage of trading using opposite Global Dividend and BMO MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Dividend 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 Global Dividend Growth 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.