Correlation Between BMO International and IShares Core
Can any of the company-specific risk be diversified away by investing in both BMO International and IShares Core 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 International and IShares Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO International Dividend and iShares Core MSCI, you can compare the effects of market volatilities on BMO International and IShares Core 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 International with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO International and IShares Core.
Diversification Opportunities for BMO International and IShares Core
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BMO and IShares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding BMO International Dividend and iShares Core MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core MSCI and BMO International 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 International Dividend are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core MSCI has no effect on the direction of BMO International i.e., BMO International and IShares Core go up and down completely randomly.
Pair Corralation between BMO International and IShares Core
Assuming the 90 days trading horizon BMO International Dividend is expected to generate 1.04 times more return on investment than IShares Core. However, BMO International is 1.04 times more volatile than iShares Core MSCI. It trades about 0.06 of its potential returns per unit of risk. iShares Core MSCI is currently generating about 0.06 per unit of risk. If you would invest 2,276 in BMO International Dividend on August 29, 2024 and sell it today you would earn a total of 407.00 from holding BMO International Dividend or generate 17.88% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
BMO International Dividend vs. iShares Core MSCI
Performance |
Timeline |
BMO International |
iShares Core MSCI |
BMO International and IShares Core Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BMO International and IShares Core
The main advantage of trading using opposite BMO International and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO International position performs unexpectedly, IShares Core 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 IShares Core will offset losses from the drop in IShares Core's long position.BMO International vs. BMO Short Term Bond | BMO International vs. BMO Canadian Bank | BMO International vs. BMO Aggregate Bond | BMO International vs. BMO Balanced ETF |
IShares Core vs. Vanguard FTSE Developed | IShares Core vs. BMO MSCI EAFE | IShares Core vs. BMO Low Volatility |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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