Correlation Between BMO MSCI and Xtrackers MSCI
Can any of the company-specific risk be diversified away by investing in both BMO MSCI and Xtrackers 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 MSCI and Xtrackers MSCI 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 Xtrackers MSCI Kokusai, you can compare the effects of market volatilities on BMO MSCI and Xtrackers 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 MSCI with a short position of Xtrackers MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO MSCI and Xtrackers MSCI.
Diversification Opportunities for BMO MSCI and Xtrackers MSCI
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between BMO and Xtrackers is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding BMO MSCI EAFE and Xtrackers MSCI Kokusai in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers MSCI Kokusai 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 Xtrackers MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers MSCI Kokusai has no effect on the direction of BMO MSCI i.e., BMO MSCI and Xtrackers MSCI go up and down completely randomly.
Pair Corralation between BMO MSCI and Xtrackers MSCI
Assuming the 90 days trading horizon BMO MSCI is expected to generate 4.5 times less return on investment than Xtrackers MSCI. But when comparing it to its historical volatility, BMO MSCI EAFE is 1.04 times less risky than Xtrackers MSCI. It trades about 0.03 of its potential returns per unit of risk. Xtrackers MSCI Kokusai is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 9,285 in Xtrackers MSCI Kokusai on September 1, 2024 and sell it today you would earn a total of 1,120 from holding Xtrackers MSCI Kokusai or generate 12.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO MSCI EAFE vs. Xtrackers MSCI Kokusai
Performance |
| Timeline |
| BMO MSCI EAFE |
| Xtrackers MSCI Kokusai |
BMO MSCI and Xtrackers MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO MSCI and Xtrackers MSCI
The main advantage of trading using opposite BMO MSCI and Xtrackers MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO MSCI position performs unexpectedly, Xtrackers 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 Xtrackers MSCI will offset losses from the drop in Xtrackers MSCI's long position.| BMO MSCI vs. Mackenzie Canadian Equity | BMO MSCI vs. BMO MSCI Emerging | BMO MSCI vs. Mackenzie Large Cap | BMO MSCI vs. BMO Long Federal |
| Xtrackers MSCI vs. WisdomTree Interest Rate | Xtrackers MSCI vs. First Trust Developed | Xtrackers MSCI vs. VictoryShares International Volatility | Xtrackers MSCI vs. Aquagold International |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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