Correlation Between BMO MSCI and BMO International
Can any of the company-specific risk be diversified away by investing in both BMO MSCI and BMO International 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 MSCI and BMO International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO MSCI EAFE and BMO International Dividend, you can compare the effects of market volatilities on BMO MSCI and BMO International 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 MSCI with a short position of BMO International. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO MSCI and BMO International.
Diversification Opportunities for BMO MSCI and BMO International
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BMO and BMO is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding BMO MSCI EAFE and BMO International Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO International and BMO 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 BMO MSCI EAFE are associated (or correlated) with BMO International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO International has no effect on the direction of BMO MSCI i.e., BMO MSCI and BMO International go up and down completely randomly.
Pair Corralation between BMO MSCI and BMO International
Assuming the 90 days trading horizon BMO MSCI EAFE is expected to generate 0.73 times more return on investment than BMO International. However, BMO MSCI EAFE is 1.38 times less risky than BMO International. It trades about 0.09 of its potential returns per unit of risk. BMO International Dividend is currently generating about 0.02 per unit of risk. If you would invest 2,940 in BMO MSCI EAFE on September 1, 2024 and sell it today you would earn a total of 30.00 from holding BMO MSCI EAFE or generate 1.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
BMO MSCI EAFE vs. BMO International Dividend
Performance |
| Timeline |
| BMO MSCI EAFE |
| BMO International |
BMO MSCI and BMO International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO MSCI and BMO International
The main advantage of trading using opposite BMO MSCI and BMO International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO MSCI position performs unexpectedly, BMO International 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 International will offset losses from the drop in BMO International's long position.| BMO MSCI vs. BMO SP 500 | BMO MSCI vs. BMO MSCI Emerging | BMO MSCI vs. BMO Global Infrastructure | BMO MSCI vs. BMO MSCI EAFE |
| BMO International vs. BMO Dividend ETF | BMO International vs. BMO International Dividend | BMO International vs. BMO High Dividend | BMO International vs. BMO Europe High |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
Other Complementary Tools
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules |