Correlation Between BMO MSCI and Mackenzie International

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

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

Diversification Opportunities for BMO MSCI and Mackenzie International

0.96

Correlation Coefficient

BMO MSCI  Mackenzie International

Almost no diversification

The 3 months correlation between BMO and Mackenzie is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding BMO MSCI EAFE and Mackenzie International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mackenzie International and BMO MSCI 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 MSCI EAFE are associated (or correlated) with Mackenzie International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mackenzie International has no effect on the direction of BMO MSCI i.e., BMO MSCI and Mackenzie International go up and down completely randomly.

Pair Corralation between BMO MSCI and Mackenzie International

Assuming the 90 days trading horizon BMO MSCI EAFE is expected to under-perform the Mackenzie International. But the etf apears to be less risky and, when comparing its historical volatility, BMO MSCI EAFE is 1.1 times less risky than Mackenzie International. The etf trades about -0.01 of its potential returns per unit of risk. The Mackenzie International Equity is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  12,085  in Mackenzie International Equity on October 12, 2024 and sell it today you would lose (29.00) from holding Mackenzie International Equity or give up 0.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

BMO MSCI EAFE  vs.  Mackenzie International Equity

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.

Mackenzie International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with BMO MSCI and Mackenzie International

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

The idea behind BMO MSCI EAFE and Mackenzie International Equity 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.