Correlation Between IShares MSCI and BMO Low
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and BMO Low 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 Low into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI World and BMO Low Volatility, you can compare the effects of market volatilities on IShares MSCI and BMO Low 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 Low. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and BMO Low.
Diversification Opportunities for IShares MSCI and BMO Low
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between IShares and BMO is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI World and BMO Low Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Low Volatility 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 World are associated (or correlated) with BMO Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Low Volatility has no effect on the direction of IShares MSCI i.e., IShares MSCI and BMO Low go up and down completely randomly.
Pair Corralation between IShares MSCI and BMO Low
Assuming the 90 days trading horizon iShares MSCI World is expected to generate 0.91 times more return on investment than BMO Low. However, iShares MSCI World is 1.1 times less risky than BMO Low. It trades about 0.15 of its potential returns per unit of risk. BMO Low Volatility is currently generating about 0.09 per unit of risk. If you would invest 8,693 in iShares MSCI World on September 12, 2024 and sell it today you would earn a total of 1,185 from holding iShares MSCI World or generate 13.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI World vs. BMO Low Volatility
Performance |
| Timeline |
| iShares MSCI World |
| BMO Low Volatility |
IShares MSCI and BMO Low Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and BMO Low
The main advantage of trading using opposite IShares MSCI and BMO Low positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, BMO Low 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 Low will offset losses from the drop in BMO Low's long position.| IShares MSCI vs. iShares MSCI Emerging | IShares MSCI vs. iShares MSCI Min | IShares MSCI vs. iShares Canadian Value | IShares MSCI vs. iShares SPTSX Small |
| BMO Low vs. iShares SPTSX Small | BMO Low vs. iShares MSCI World | BMO Low vs. iShares Small Cap | BMO Low vs. iShares 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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