Correlation Between BMO MSCI and IShares Canadian
Can any of the company-specific risk be diversified away by investing in both BMO MSCI and IShares Canadian 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 IShares Canadian 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 iShares Canadian Growth, you can compare the effects of market volatilities on BMO MSCI and IShares Canadian 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 IShares Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO MSCI and IShares Canadian.
Diversification Opportunities for BMO MSCI and IShares Canadian
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BMO and IShares is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding BMO MSCI EAFE and iShares Canadian Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Canadian Growth 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 IShares Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Canadian Growth has no effect on the direction of BMO MSCI i.e., BMO MSCI and IShares Canadian go up and down completely randomly.
Pair Corralation between BMO MSCI and IShares Canadian
Assuming the 90 days trading horizon BMO MSCI is expected to generate 12.92 times less return on investment than IShares Canadian. But when comparing it to its historical volatility, BMO MSCI EAFE is 1.25 times less risky than IShares Canadian. It trades about 0.05 of its potential returns per unit of risk. iShares Canadian Growth is currently generating about 0.53 of returns per unit of risk over similar time horizon. If you would invest 5,318 in iShares Canadian Growth on September 4, 2024 and sell it today you would earn a total of 521.00 from holding iShares Canadian Growth or generate 9.8% 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. iShares Canadian Growth
Performance |
| Timeline |
| BMO MSCI EAFE |
| iShares Canadian Growth |
BMO MSCI and IShares Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO MSCI and IShares Canadian
The main advantage of trading using opposite BMO MSCI and IShares Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO MSCI position performs unexpectedly, IShares Canadian 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 Canadian will offset losses from the drop in IShares Canadian's long position.| BMO MSCI vs. Fidelity Canadian High | BMO MSCI vs. Fidelity High Dividend | BMO MSCI vs. Fidelity High Dividend | BMO MSCI vs. Fidelity Dividend for |
| IShares Canadian vs. iShares Canadian Value | IShares Canadian vs. iShares Canadian Government | IShares Canadian vs. iShares SPTSX Small | IShares Canadian vs. iShares SPTSX Completion |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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