Correlation Between BMO SIA and BMO MSCI
Can any of the company-specific risk be diversified away by investing in both BMO SIA 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 SIA 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 SIA Focused and BMO MSCI USA, you can compare the effects of market volatilities on BMO SIA 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 SIA with a short position of BMO MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SIA and BMO MSCI.
Diversification Opportunities for BMO SIA and BMO MSCI
Almost no diversification
The 3 months correlation between BMO and BMO is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding BMO SIA Focused and BMO MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO MSCI USA and BMO SIA 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 SIA Focused 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 USA has no effect on the direction of BMO SIA i.e., BMO SIA and BMO MSCI go up and down completely randomly.
Pair Corralation between BMO SIA and BMO MSCI
Assuming the 90 days trading horizon BMO SIA is expected to generate 1.37 times less return on investment than BMO MSCI. In addition to that, BMO SIA is 1.04 times more volatile than BMO MSCI USA. It trades about 0.05 of its total potential returns per unit of risk. BMO MSCI USA is currently generating about 0.07 per unit of volatility. If you would invest 2,501 in BMO MSCI USA on September 4, 2024 and sell it today you would earn a total of 713.00 from holding BMO MSCI USA or generate 28.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO SIA Focused vs. BMO MSCI USA
Performance |
| Timeline |
| BMO SIA Focused |
| BMO MSCI USA |
BMO SIA and BMO MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO SIA and BMO MSCI
The main advantage of trading using opposite BMO SIA and BMO MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO SIA 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 SIA vs. Mackenzie Large Cap | BMO SIA vs. Goldman Sachs ActiveBeta | BMO SIA vs. BMO MSCI EAFE | BMO SIA vs. BMO Long Federal |
| BMO MSCI vs. BMO MSCI Canada | BMO MSCI vs. BMO Low Volatility | BMO MSCI vs. BMO Low Volatility | BMO MSCI vs. BMO MSCI All |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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