Correlation Between Wealthsimple Developed and BMO MSCI
Can any of the company-specific risk be diversified away by investing in both Wealthsimple Developed 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 Wealthsimple Developed and BMO MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wealthsimple Developed Markets and BMO MSCI EAFE, you can compare the effects of market volatilities on Wealthsimple Developed 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 Wealthsimple Developed with a short position of BMO MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wealthsimple Developed and BMO MSCI.
Diversification Opportunities for Wealthsimple Developed and BMO MSCI
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wealthsimple and BMO is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Wealthsimple Developed Markets and BMO MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO MSCI EAFE and Wealthsimple Developed 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 Wealthsimple Developed Markets 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 EAFE has no effect on the direction of Wealthsimple Developed i.e., Wealthsimple Developed and BMO MSCI go up and down completely randomly.
Pair Corralation between Wealthsimple Developed and BMO MSCI
Assuming the 90 days trading horizon Wealthsimple Developed is expected to generate 1.41 times less return on investment than BMO MSCI. In addition to that, Wealthsimple Developed is 1.02 times more volatile than BMO MSCI EAFE. It trades about 0.06 of its total potential returns per unit of risk. BMO MSCI EAFE is currently generating about 0.09 per unit of volatility. If you would invest 2,550 in BMO MSCI EAFE on August 24, 2024 and sell it today you would earn a total of 391.00 from holding BMO MSCI EAFE or generate 15.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wealthsimple Developed Markets vs. BMO MSCI EAFE
Performance |
| Timeline |
| Wealthsimple Developed |
| BMO MSCI EAFE |
Wealthsimple Developed and BMO MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wealthsimple Developed and BMO MSCI
The main advantage of trading using opposite Wealthsimple Developed and BMO MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wealthsimple Developed 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.| Wealthsimple Developed vs. iShares Core MSCI | Wealthsimple Developed vs. BMO MSCI EAFE | Wealthsimple Developed vs. Vanguard FTSE Developed | Wealthsimple Developed vs. iShares MSCI EAFE |
| BMO MSCI vs. iShares Core MSCI | BMO MSCI vs. BMO MSCI EAFE | BMO MSCI vs. Vanguard FTSE Developed | BMO MSCI vs. iShares 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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