Correlation Between IShares Core and BMO International
Can any of the company-specific risk be diversified away by investing in both IShares Core and BMO International 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 Core and BMO International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core MSCI and BMO International Dividend, you can compare the effects of market volatilities on IShares Core and BMO International 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 Core with a short position of BMO International. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and BMO International.
Diversification Opportunities for IShares Core and BMO International
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and BMO is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and BMO International Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO International and IShares Core 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 Core MSCI are associated (or correlated) with BMO International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO International has no effect on the direction of IShares Core i.e., IShares Core and BMO International go up and down completely randomly.
Pair Corralation between IShares Core and BMO International
Assuming the 90 days trading horizon iShares Core MSCI is expected to generate 0.7 times more return on investment than BMO International. However, iShares Core MSCI is 1.42 times less risky than BMO International. It trades about -0.18 of its potential returns per unit of risk. BMO International Dividend is currently generating about -0.16 per unit of risk. If you would invest 3,871 in iShares Core MSCI on August 29, 2024 and sell it today you would lose (89.00) from holding iShares Core MSCI or give up 2.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core MSCI vs. BMO International Dividend
Performance |
| Timeline |
| iShares Core MSCI |
| BMO International |
IShares Core and BMO International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and BMO International
The main advantage of trading using opposite IShares Core and BMO International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, BMO International 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 International will offset losses from the drop in BMO International's long position.| IShares Core vs. Vanguard FTSE Developed | IShares Core vs. BMO MSCI EAFE | IShares Core vs. BMO Low Volatility |
| BMO International vs. BMO Short Term Bond | BMO International vs. BMO Canadian Bank | BMO International vs. BMO Aggregate Bond | BMO International vs. BMO Balanced ETF |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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