Correlation Between IShares MSCI and BMO MSCI
Can any of the company-specific risk be diversified away by investing in both IShares MSCI 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 MSCI 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 MSCI EAFE and BMO MSCI EAFE, you can compare the effects of market volatilities on IShares MSCI 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 MSCI with a short position of BMO MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and BMO MSCI.
Diversification Opportunities for IShares MSCI and BMO MSCI
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and BMO is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI EAFE 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 IShares MSCI 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 MSCI EAFE 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 IShares MSCI i.e., IShares MSCI and BMO MSCI go up and down completely randomly.
Pair Corralation between IShares MSCI and BMO MSCI
Assuming the 90 days trading horizon iShares MSCI EAFE is expected to generate 1.05 times more return on investment than BMO MSCI. However, IShares MSCI is 1.05 times more volatile than BMO MSCI EAFE. It trades about -0.08 of its potential returns per unit of risk. BMO MSCI EAFE is currently generating about -0.09 per unit of risk. If you would invest 3,673 in iShares MSCI EAFE on August 28, 2024 and sell it today you would lose (37.00) from holding iShares MSCI EAFE or give up 1.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI EAFE vs. BMO MSCI EAFE
Performance |
| Timeline |
| iShares MSCI EAFE |
| BMO MSCI EAFE |
IShares MSCI and BMO MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and BMO MSCI
The main advantage of trading using opposite IShares MSCI and BMO MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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 MSCI vs. iShares SPTSX Completion | IShares MSCI vs. iShares Canadian Universe | IShares MSCI vs. iShares Core SP | IShares MSCI vs. iShares SPTSX Capped |
| BMO MSCI vs. BMO SP 500 | BMO MSCI vs. BMO MSCI Emerging | BMO MSCI vs. BMO Global Infrastructure | BMO MSCI vs. BMO 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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