Correlation Between BMO Mid and BMO MSCI
Can any of the company-specific risk be diversified away by investing in both BMO Mid 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 BMO Mid and BMO MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Mid Corporate and BMO MSCI EAFE, you can compare the effects of market volatilities on BMO Mid 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 BMO Mid with a short position of BMO MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Mid and BMO MSCI.
Diversification Opportunities for BMO Mid and BMO MSCI
Average diversification
The 3 months correlation between BMO and BMO is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding BMO Mid Corporate 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 BMO Mid 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 BMO Mid 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 EAFE has no effect on the direction of BMO Mid i.e., BMO Mid and BMO MSCI go up and down completely randomly.
Pair Corralation between BMO Mid and BMO MSCI
Assuming the 90 days trading horizon BMO Mid Corporate is expected to generate 0.56 times more return on investment than BMO MSCI. However, BMO Mid Corporate is 1.78 times less risky than BMO MSCI. It trades about 0.07 of its potential returns per unit of risk. BMO MSCI EAFE is currently generating about -0.19 per unit of risk. If you would invest 1,537 in BMO Mid Corporate on August 29, 2024 and sell it today you would earn a total of 8.00 from holding BMO Mid Corporate or generate 0.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Mid Corporate vs. BMO MSCI EAFE
Performance |
| Timeline |
| BMO Mid Corporate |
| BMO MSCI EAFE |
BMO Mid and BMO MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Mid and BMO MSCI
The main advantage of trading using opposite BMO Mid and BMO MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Mid 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.| BMO Mid vs. BMO Long Corporate | BMO Mid vs. BMO Short Corporate | BMO Mid vs. BMO High Yield | BMO Mid vs. BMO Short Provincial |
| BMO MSCI vs. Mackenzie Canadian Equity | BMO MSCI vs. BMO MSCI Emerging | BMO MSCI vs. Mackenzie Large Cap | BMO MSCI vs. BMO Long Federal |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
Other Complementary Tools
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities |