Correlation Between BMO MSCI and IShares SPTSX
Can any of the company-specific risk be diversified away by investing in both BMO MSCI and IShares SPTSX 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 IShares SPTSX 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 iShares SPTSX 60, you can compare the effects of market volatilities on BMO MSCI and IShares SPTSX 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 IShares SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO MSCI and IShares SPTSX.
Diversification Opportunities for BMO MSCI and IShares SPTSX
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BMO and IShares is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding BMO MSCI EAFE and iShares SPTSX 60 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SPTSX 60 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 IShares SPTSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SPTSX 60 has no effect on the direction of BMO MSCI i.e., BMO MSCI and IShares SPTSX go up and down completely randomly.
Pair Corralation between BMO MSCI and IShares SPTSX
Assuming the 90 days trading horizon BMO MSCI EAFE is expected to under-perform the IShares SPTSX. In addition to that, BMO MSCI is 1.39 times more volatile than iShares SPTSX 60. It trades about -0.01 of its total potential returns per unit of risk. iShares SPTSX 60 is currently generating about 0.28 per unit of volatility. If you would invest 3,674 in iShares SPTSX 60 on September 13, 2024 and sell it today you would earn a total of 209.00 from holding iShares SPTSX 60 or generate 5.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
BMO MSCI EAFE vs. iShares SPTSX 60
Performance |
| Timeline |
| BMO MSCI EAFE |
| iShares SPTSX 60 |
BMO MSCI and IShares SPTSX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO MSCI and IShares SPTSX
The main advantage of trading using opposite BMO MSCI and IShares SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO MSCI position performs unexpectedly, IShares SPTSX 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 IShares SPTSX will offset losses from the drop in IShares SPTSX's long position.| BMO MSCI vs. iShares SPTSX 60 | BMO MSCI vs. iShares Core SP | BMO MSCI vs. iShares Core SPTSX | BMO MSCI vs. BMO Aggregate Bond |
| IShares SPTSX vs. iShares Core SP | IShares SPTSX vs. iShares Core SPTSX | IShares SPTSX vs. iShares SPTSX Capped | IShares SPTSX vs. iShares SPTSX Capped |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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