Correlation Between Dow Jones and BMO MSCI
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and BMO MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and BMO MSCI Canada, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of BMO MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and BMO MSCI.
Diversification Opportunities for Dow Jones and BMO MSCI
Almost no diversification
The 3 months correlation between Dow and BMO is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial 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 Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and BMO MSCI go up and down completely randomly.
Pair Corralation between Dow Jones and BMO MSCI
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.31 times less return on investment than BMO MSCI. But when comparing it to its historical volatility, Dow Jones Industrial is 1.69 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 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,902 in BMO MSCI Canada on September 12, 2024 and sell it today you would earn a total of 1,239 from holding BMO MSCI Canada or generate 42.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 97.77% |
| Values | Daily Returns |
Dow Jones Industrial vs. BMO MSCI Canada
Performance |
| Timeline |
Dow Jones and BMO MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
BMO MSCI Canada
Pair trading matchups for BMO MSCI
Pair Trading with Dow Jones and BMO MSCI
The main advantage of trading using opposite Dow Jones and BMO MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Aeye Inc | Dow Jones vs. Gentex | Dow Jones vs. Marine Products | Dow Jones vs. CarsalesCom Ltd ADR |
| BMO MSCI vs. BMO MSCI USA | BMO MSCI vs. BMO MSCI Global | BMO MSCI vs. BMO MSCI EAFE | BMO MSCI vs. BMO Balanced ESG |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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