Correlation Between IShares IG and BMO MSCI

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Can any of the company-specific risk be diversified away by investing in both IShares IG 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 IG 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 IG Corporate and BMO MSCI India, you can compare the effects of market volatilities on IShares IG 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 IG with a short position of BMO MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares IG and BMO MSCI.

Diversification Opportunities for IShares IG and BMO MSCI

0.43
  Correlation Coefficient

Very weak diversification

The 3 months correlation between IShares and BMO is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding iShares IG Corporate and BMO MSCI India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO MSCI India and IShares IG 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 IG Corporate 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 India has no effect on the direction of IShares IG i.e., IShares IG and BMO MSCI go up and down completely randomly.

Pair Corralation between IShares IG and BMO MSCI

Assuming the 90 days trading horizon iShares IG Corporate is expected to generate 0.4 times more return on investment than BMO MSCI. However, iShares IG Corporate is 2.48 times less risky than BMO MSCI. It trades about 0.12 of its potential returns per unit of risk. BMO MSCI India is currently generating about -0.11 per unit of risk. If you would invest  1,965  in iShares IG Corporate on November 27, 2024 and sell it today you would earn a total of  17.00  from holding iShares IG Corporate or generate 0.87% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

iShares IG Corporate  vs.  BMO MSCI India

 Performance 
       Timeline  
iShares IG Corporate 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days iShares IG Corporate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, IShares IG is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
BMO MSCI India 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days BMO MSCI India has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

IShares IG and BMO MSCI Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IShares IG and BMO MSCI

The main advantage of trading using opposite IShares IG and BMO MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares IG 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.
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The idea behind iShares IG Corporate and BMO MSCI India pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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