Correlation Between First Trust and BMO MSCI
Can any of the company-specific risk be diversified away by investing in both First Trust 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 First Trust and BMO MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Indxx and BMO MSCI Europe, you can compare the effects of market volatilities on First Trust 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 First Trust with a short position of BMO MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and BMO MSCI.
Diversification Opportunities for First Trust and BMO MSCI
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and BMO is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Indxx and BMO MSCI Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO MSCI Europe and First Trust 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 First Trust Indxx 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 Europe has no effect on the direction of First Trust i.e., First Trust and BMO MSCI go up and down completely randomly.
Pair Corralation between First Trust and BMO MSCI
Assuming the 90 days trading horizon First Trust Indxx is expected to generate 0.98 times more return on investment than BMO MSCI. However, First Trust Indxx is 1.03 times less risky than BMO MSCI. It trades about 0.12 of its potential returns per unit of risk. BMO MSCI Europe is currently generating about 0.03 per unit of risk. If you would invest 861.00 in First Trust Indxx on September 1, 2024 and sell it today you would earn a total of 292.00 from holding First Trust Indxx or generate 33.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Indxx vs. BMO MSCI Europe
Performance |
| Timeline |
| First Trust Indxx |
| BMO MSCI Europe |
First Trust and BMO MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and BMO MSCI
The main advantage of trading using opposite First Trust and BMO MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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.| First Trust vs. iShares Canadian HYBrid | First Trust vs. Brompton European Dividend | First Trust vs. Solar Alliance Energy | First Trust vs. PHN Multi Style All Cap |
| BMO MSCI vs. BMO MSCI All | BMO MSCI vs. BMO MSCI USA | BMO MSCI vs. BMO MSCI Emerging | BMO MSCI vs. BMO MSCI EAFE |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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