Correlation Between BMO International and BMO MSCI
Can any of the company-specific risk be diversified away by investing in both BMO International 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 BMO International and BMO MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO International Dividend and BMO MSCI Canada, you can compare the effects of market volatilities on BMO International 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 BMO International with a short position of BMO MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO International and BMO MSCI.
Diversification Opportunities for BMO International and BMO MSCI
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between BMO and BMO is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding BMO International Dividend and BMO MSCI Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO MSCI Canada and BMO International 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 International Dividend 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 Canada has no effect on the direction of BMO International i.e., BMO International and BMO MSCI go up and down completely randomly.
Pair Corralation between BMO International and BMO MSCI
Assuming the 90 days trading horizon BMO International Dividend is expected to generate 0.76 times more return on investment than BMO MSCI. However, BMO International Dividend is 1.31 times less risky than BMO MSCI. It trades about -0.09 of its potential returns per unit of risk. BMO MSCI Canada is currently generating about -0.17 per unit of risk. If you would invest 2,712 in BMO International Dividend on October 8, 2024 and sell it today you would lose (19.00) from holding BMO International Dividend or give up 0.7% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
BMO International Dividend vs. BMO MSCI Canada
Performance |
Timeline |
BMO International |
BMO MSCI Canada |
BMO International and BMO MSCI Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BMO International and BMO MSCI
The main advantage of trading using opposite BMO International and BMO MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO International 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.BMO International vs. TD Canadian Equity | BMO International vs. TD Equity Index | BMO International vs. TD Canadian Aggregate | BMO International vs. TD International Equity |
BMO MSCI vs. BMO MSCI USA | BMO MSCI vs. BMO Low Volatility | BMO MSCI vs. BMO International Dividend | BMO MSCI vs. BMO Low Volatility |
Check out your portfolio center.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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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