Correlation Between IShares Core and BMO MSCI
Can any of the company-specific risk be diversified away by investing in both IShares Core 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 Core 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 Core SP and BMO MSCI EAFE, you can compare the effects of market volatilities on IShares Core 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 Core with a short position of BMO MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and BMO MSCI.
Diversification Opportunities for IShares Core and BMO MSCI
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IShares and BMO is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP 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 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 SP 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 Core i.e., IShares Core and BMO MSCI go up and down completely randomly.
Pair Corralation between IShares Core and BMO MSCI
Assuming the 90 days trading horizon iShares Core SP is expected to generate 1.18 times more return on investment than BMO MSCI. However, IShares Core is 1.18 times more volatile than BMO MSCI EAFE. It trades about 0.12 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 3,998 in iShares Core SP on September 13, 2024 and sell it today you would earn a total of 2,324 from holding iShares Core SP or generate 58.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core SP vs. BMO MSCI EAFE
Performance |
| Timeline |
| iShares Core SP |
| BMO MSCI EAFE |
IShares Core and BMO MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and BMO MSCI
The main advantage of trading using opposite IShares Core and BMO MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 Core vs. iShares SPTSX Capped | IShares Core vs. BMO NASDAQ 100 | IShares Core vs. Vanguard SP 500 | IShares Core vs. Vanguard SP 500 |
| BMO MSCI vs. iShares SPTSX 60 | BMO MSCI vs. iShares Core SP | BMO MSCI vs. iShares Core SPTSX | BMO MSCI vs. BMO Aggregate Bond |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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