Correlation Between BMO MSCI and IShares Core
Can any of the company-specific risk be diversified away by investing in both BMO MSCI 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 MSCI 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 MSCI EAFE and iShares Core MSCI, you can compare the effects of market volatilities on BMO MSCI 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 MSCI with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO MSCI and IShares Core.
Diversification Opportunities for BMO MSCI and IShares Core
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between BMO and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding BMO MSCI EAFE 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 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 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 MSCI i.e., BMO MSCI and IShares Core go up and down completely randomly.
Pair Corralation between BMO MSCI and IShares Core
Assuming the 90 days trading horizon BMO MSCI is expected to generate 1.02 times less return on investment than IShares Core. But when comparing it to its historical volatility, BMO MSCI EAFE is 1.01 times less risky than IShares Core. It trades about 0.08 of its potential returns per unit of risk. iShares Core MSCI is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,305 in iShares Core MSCI on August 24, 2024 and sell it today you would earn a total of 440.00 from holding iShares Core MSCI or generate 13.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO MSCI EAFE vs. iShares Core MSCI
Performance |
| Timeline |
| BMO MSCI EAFE |
| iShares Core MSCI |
BMO MSCI and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO MSCI and IShares Core
The main advantage of trading using opposite BMO MSCI and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO MSCI 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 MSCI vs. iShares Core MSCI | BMO MSCI vs. Vanguard FTSE Developed | BMO MSCI vs. iShares MSCI EAFE | BMO MSCI vs. iShares Core MSCI |
| IShares Core vs. BMO MSCI EAFE | IShares Core vs. Vanguard FTSE Developed | IShares Core vs. iShares MSCI EAFE | IShares Core vs. iShares Core MSCI |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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