Correlation Between BMO MSCI and IShares Core
Can any of the company-specific risk be diversified away by investing in both BMO MSCI and IShares Core 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 Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO MSCI Global and iShares Core SP, you can compare the effects of market volatilities on BMO MSCI and IShares Core 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 Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO MSCI and IShares Core.
Diversification Opportunities for BMO MSCI and IShares Core
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BMO and IShares is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding BMO MSCI Global and iShares Core SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core SP 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 Global are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core SP has no effect on the direction of BMO MSCI i.e., BMO MSCI and IShares Core go up and down completely randomly.
Pair Corralation between BMO MSCI and IShares Core
Assuming the 90 days trading horizon BMO MSCI Global is expected to generate 0.89 times more return on investment than IShares Core. However, BMO MSCI Global is 1.12 times less risky than IShares Core. It trades about 0.15 of its potential returns per unit of risk. iShares Core SP is currently generating about 0.12 per unit of risk. If you would invest 5,036 in BMO MSCI Global on October 20, 2024 and sell it today you would earn a total of 116.00 from holding BMO MSCI Global or generate 2.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO MSCI Global vs. iShares Core SP
Performance |
| Timeline |
| BMO MSCI Global |
| iShares Core SP |
BMO MSCI and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO MSCI and IShares Core
The main advantage of trading using opposite BMO MSCI and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO MSCI position performs unexpectedly, IShares Core 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 Core will offset losses from the drop in IShares Core'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 Core vs. iShares SPTSX 60 | IShares Core vs. iShares MSCI EAFE | IShares Core vs. iShares Core SPTSX | IShares Core 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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