Correlation Between BMO Long and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both BMO Long and IShares 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 IShares 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 iShares MSCI Canada, you can compare the effects of market volatilities on BMO Long and IShares 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 IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Long and IShares MSCI.
Diversification Opportunities for BMO Long and IShares MSCI
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BMO and IShares is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding BMO Long Federal and iShares MSCI Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Canada 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 IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Canada has no effect on the direction of BMO Long i.e., BMO Long and IShares MSCI go up and down completely randomly.
Pair Corralation between BMO Long and IShares MSCI
Assuming the 90 days trading horizon BMO Long is expected to generate 8.05 times less return on investment than IShares MSCI. In addition to that, BMO Long is 1.85 times more volatile than iShares MSCI Canada. It trades about 0.01 of its total potential returns per unit of risk. iShares MSCI Canada is currently generating about 0.11 per unit of volatility. If you would invest 3,525 in iShares MSCI Canada on September 4, 2024 and sell it today you would earn a total of 1,232 from holding iShares MSCI Canada or generate 34.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Long Federal vs. iShares MSCI Canada
Performance |
| Timeline |
| BMO Long Federal |
| iShares MSCI Canada |
BMO Long and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Long and IShares MSCI
The main advantage of trading using opposite BMO Long and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Long position performs unexpectedly, IShares 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 IShares MSCI will offset losses from the drop in IShares MSCI's long position.| BMO Long vs. BMO Mid Corporate | BMO Long vs. BMO Short Corporate | BMO Long vs. BMO High Yield | BMO Long vs. BMO Emerging Markets |
| IShares MSCI vs. Mackenzie Large Cap | IShares MSCI vs. Goldman Sachs ActiveBeta | IShares MSCI vs. BMO MSCI EAFE | IShares MSCI vs. BMO Long Federal |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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