Correlation Between Visa and BMO MSCI
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and BMO MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and BMO MSCI Canada, you can compare the effects of market volatilities on Visa 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 Visa with a short position of BMO MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and BMO MSCI.
Diversification Opportunities for Visa and BMO MSCI
Poor diversification
The 3 months correlation between Visa and BMO is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A 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 Visa 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 Visa Class A 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 Visa i.e., Visa and BMO MSCI go up and down completely randomly.
Pair Corralation between Visa and BMO MSCI
Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.76 times more return on investment than BMO MSCI. However, Visa is 1.76 times more volatile than BMO MSCI Canada. It trades about 0.41 of its potential returns per unit of risk. BMO MSCI Canada is currently generating about 0.16 per unit of risk. If you would invest 28,134 in Visa Class A on August 30, 2024 and sell it today you would earn a total of 3,336 from holding Visa Class A or generate 11.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. BMO MSCI Canada
Performance |
| Timeline |
| Visa Class A |
| BMO MSCI Canada |
Visa and BMO MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and BMO MSCI
The main advantage of trading using opposite Visa and BMO MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| BMO MSCI vs. iShares SPTSX 60 | BMO MSCI vs. iShares Core SPTSX | BMO MSCI vs. BMO SPTSX Capped | BMO MSCI vs. Vanguard FTSE Canada |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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