Correlation Between BMO Long and SPDR MSCI
Can any of the company-specific risk be diversified away by investing in both BMO Long and SPDR 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 Long and SPDR MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Long Federal and SPDR MSCI ACWI, you can compare the effects of market volatilities on BMO Long and SPDR 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 Long with a short position of SPDR MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Long and SPDR MSCI.
Diversification Opportunities for BMO Long and SPDR MSCI
Very good diversification
The 3 months correlation between BMO and SPDR is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding BMO Long Federal and SPDR MSCI ACWI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI ACWI and BMO Long 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 Long Federal are associated (or correlated) with SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI ACWI has no effect on the direction of BMO Long i.e., BMO Long and SPDR MSCI go up and down completely randomly.
Pair Corralation between BMO Long and SPDR MSCI
Assuming the 90 days trading horizon BMO Long is expected to generate 6.65 times less return on investment than SPDR MSCI. In addition to that, BMO Long is 1.11 times more volatile than SPDR MSCI ACWI. It trades about 0.02 of its total potential returns per unit of risk. SPDR MSCI ACWI is currently generating about 0.12 per unit of volatility. If you would invest 2,983 in SPDR MSCI ACWI on August 26, 2024 and sell it today you would earn a total of 749.00 from holding SPDR MSCI ACWI or generate 25.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
BMO Long Federal vs. SPDR MSCI ACWI
Performance |
| Timeline |
| BMO Long Federal |
| SPDR MSCI ACWI |
BMO Long and SPDR MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Long and SPDR MSCI
The main advantage of trading using opposite BMO Long and SPDR MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Long position performs unexpectedly, SPDR 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 SPDR MSCI will offset losses from the drop in SPDR MSCI's long position.| BMO Long vs. iShares MSCI Emerging | BMO Long vs. iShares MSCI Global | BMO Long vs. iShares Core Canadian | BMO Long vs. Vanguard Total Market |
| SPDR MSCI vs. iShares MSCI Emerging | SPDR MSCI vs. BMO Long Federal | SPDR MSCI vs. iShares MSCI EAFE | SPDR MSCI vs. Vanguard Total Market |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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