Correlation Between BMO MSCI and IShares ESG
Can any of the company-specific risk be diversified away by investing in both BMO MSCI and IShares ESG 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 ESG 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 ESG Advanced, you can compare the effects of market volatilities on BMO MSCI and IShares ESG 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 ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO MSCI and IShares ESG.
Diversification Opportunities for BMO MSCI and IShares ESG
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BMO and IShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding BMO MSCI EAFE and iShares ESG Advanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Advanced 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 ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Advanced has no effect on the direction of BMO MSCI i.e., BMO MSCI and IShares ESG go up and down completely randomly.
Pair Corralation between BMO MSCI and IShares ESG
Assuming the 90 days trading horizon BMO MSCI EAFE is expected to generate 0.95 times more return on investment than IShares ESG. However, BMO MSCI EAFE is 1.05 times less risky than IShares ESG. It trades about 0.03 of its potential returns per unit of risk. iShares ESG Advanced is currently generating about 0.02 per unit of risk. If you would invest 2,290 in BMO MSCI EAFE on September 1, 2024 and sell it today you would earn a total of 52.00 from holding BMO MSCI EAFE or generate 2.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
BMO MSCI EAFE vs. iShares ESG Advanced
Performance |
| Timeline |
| BMO MSCI EAFE |
| iShares ESG Advanced |
BMO MSCI and IShares ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO MSCI and IShares ESG
The main advantage of trading using opposite BMO MSCI and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO MSCI position performs unexpectedly, IShares ESG 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 ESG will offset losses from the drop in IShares ESG'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 |
| IShares ESG vs. iShares ESG Advanced | IShares ESG vs. iShares ESG Advanced | IShares ESG vs. iShares ESG Aware | IShares ESG vs. iShares ESG Equity |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
Other Complementary Tools
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |