Correlation Between BMO MSCI and BMO Equal
Can any of the company-specific risk be diversified away by investing in both BMO MSCI and BMO Equal 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 Equal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO MSCI Emerging and BMO Equal Weight, you can compare the effects of market volatilities on BMO MSCI and BMO Equal 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 Equal. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO MSCI and BMO Equal.
Diversification Opportunities for BMO MSCI and BMO Equal
Modest diversification
The 3 months correlation between BMO and BMO is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding BMO MSCI Emerging and BMO Equal Weight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Equal Weight 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 Emerging are associated (or correlated) with BMO Equal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Equal Weight has no effect on the direction of BMO MSCI i.e., BMO MSCI and BMO Equal go up and down completely randomly.
Pair Corralation between BMO MSCI and BMO Equal
Assuming the 90 days trading horizon BMO MSCI Emerging is expected to under-perform the BMO Equal. But the etf apears to be less risky and, when comparing its historical volatility, BMO MSCI Emerging is 3.1 times less risky than BMO Equal. The etf trades about -0.08 of its potential returns per unit of risk. The BMO Equal Weight is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 3,126 in BMO Equal Weight on September 1, 2024 and sell it today you would earn a total of 431.00 from holding BMO Equal Weight or generate 13.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO MSCI Emerging vs. BMO Equal Weight
Performance |
| Timeline |
| BMO MSCI Emerging |
| BMO Equal Weight |
BMO MSCI and BMO Equal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO MSCI and BMO Equal
The main advantage of trading using opposite BMO MSCI and BMO Equal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO MSCI position performs unexpectedly, BMO Equal 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 Equal will offset losses from the drop in BMO Equal's long position.| BMO MSCI vs. BMO MSCI EAFE | BMO MSCI vs. BMO MSCI China | BMO MSCI vs. BMO MSCI EAFE | BMO MSCI vs. BMO MSCI India |
| BMO Equal vs. BMO Equal Weight | BMO Equal vs. BMO Equal Weight | BMO Equal vs. BMO SPTSX Equal | BMO Equal vs. BMO Equal Weight |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
Other Complementary Tools
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Stocks Directory Find actively traded stocks across global markets | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities |