Correlation Between IShares China and BMO MSCI
Can any of the company-specific risk be diversified away by investing in both IShares China 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 IShares China and BMO MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares China and BMO MSCI China, you can compare the effects of market volatilities on IShares China 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 IShares China with a short position of BMO MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares China and BMO MSCI.
Diversification Opportunities for IShares China and BMO MSCI
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and BMO is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares China and BMO MSCI China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO MSCI China and IShares China 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 iShares China 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 China has no effect on the direction of IShares China i.e., IShares China and BMO MSCI go up and down completely randomly.
Pair Corralation between IShares China and BMO MSCI
Assuming the 90 days trading horizon iShares China is expected to generate 1.19 times more return on investment than BMO MSCI. However, IShares China is 1.19 times more volatile than BMO MSCI China. It trades about -0.07 of its potential returns per unit of risk. BMO MSCI China is currently generating about -0.14 per unit of risk. If you would invest 2,110 in iShares China on September 3, 2024 and sell it today you would lose (77.00) from holding iShares China or give up 3.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares China vs. BMO MSCI China
Performance |
| Timeline |
| iShares China |
| BMO MSCI China |
IShares China and BMO MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares China and BMO MSCI
The main advantage of trading using opposite IShares China and BMO MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares China 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.| IShares China vs. iShares India Index | IShares China vs. iShares MSCI Emerging | IShares China vs. BMO MSCI China | IShares China vs. iShares Global Healthcare |
| BMO MSCI vs. iShares China | BMO MSCI vs. BMO MSCI India | BMO MSCI vs. BMO MSCI Emerging | BMO MSCI vs. BMO NASDAQ 100 |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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