Correlation Between BMO Balanced and BMO MSCI
Can any of the company-specific risk be diversified away by investing in both BMO Balanced and BMO 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 Balanced and BMO MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Balanced ESG and BMO MSCI Canada, you can compare the effects of market volatilities on BMO Balanced and BMO 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 Balanced with a short position of BMO MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Balanced and BMO MSCI.
Diversification Opportunities for BMO Balanced and BMO MSCI
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BMO and BMO is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding BMO Balanced ESG and BMO MSCI Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO MSCI Canada and BMO Balanced 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 Balanced ESG are associated (or correlated) with BMO MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO MSCI Canada has no effect on the direction of BMO Balanced i.e., BMO Balanced and BMO MSCI go up and down completely randomly.
Pair Corralation between BMO Balanced and BMO MSCI
Assuming the 90 days trading horizon BMO Balanced is expected to generate 1.28 times less return on investment than BMO MSCI. But when comparing it to its historical volatility, BMO Balanced ESG is 2.52 times less risky than BMO MSCI. It trades about 0.13 of its potential returns per unit of risk. BMO MSCI Canada is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,902 in BMO MSCI Canada on September 12, 2024 and sell it today you would earn a total of 1,239 from holding BMO MSCI Canada or generate 42.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 97.77% |
| Values | Daily Returns |
BMO Balanced ESG vs. BMO MSCI Canada
Performance |
| Timeline |
| BMO Balanced ESG |
| BMO MSCI Canada |
BMO Balanced and BMO MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Balanced and BMO MSCI
The main advantage of trading using opposite BMO Balanced and BMO MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Balanced position performs unexpectedly, BMO 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 BMO MSCI will offset losses from the drop in BMO MSCI's long position.| BMO Balanced vs. iShares SPTSX 60 | BMO Balanced vs. iShares Core SP | BMO Balanced vs. iShares Core SPTSX | BMO Balanced vs. BMO Aggregate Bond |
| BMO MSCI vs. BMO MSCI USA | BMO MSCI vs. BMO MSCI Global | BMO MSCI vs. BMO MSCI EAFE | BMO MSCI vs. BMO Balanced ESG |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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