Correlation Between BMO Short and BMO MSCI
Can any of the company-specific risk be diversified away by investing in both BMO Short 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 Short 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 Short Term Bond and BMO MSCI EAFE, you can compare the effects of market volatilities on BMO Short 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 Short with a short position of BMO MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Short and BMO MSCI.
Diversification Opportunities for BMO Short and BMO MSCI
Significant diversification
The 3 months correlation between BMO and BMO is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding BMO Short Term Bond and BMO MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO MSCI EAFE and BMO Short 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 Short Term Bond 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 EAFE has no effect on the direction of BMO Short i.e., BMO Short and BMO MSCI go up and down completely randomly.
Pair Corralation between BMO Short and BMO MSCI
Assuming the 90 days trading horizon BMO Short Term Bond is expected to generate 0.26 times more return on investment than BMO MSCI. However, BMO Short Term Bond is 3.9 times less risky than BMO MSCI. It trades about -0.06 of its potential returns per unit of risk. BMO MSCI EAFE is currently generating about -0.09 per unit of risk. If you would invest 4,838 in BMO Short Term Bond on August 28, 2024 and sell it today you would lose (10.00) from holding BMO Short Term Bond or give up 0.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
BMO Short Term Bond vs. BMO MSCI EAFE
Performance |
| Timeline |
| BMO Short Term |
| BMO MSCI EAFE |
BMO Short and BMO MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Short and BMO MSCI
The main advantage of trading using opposite BMO Short and BMO MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Short 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 Short vs. Mackenzie Canadian Aggregate | BMO Short vs. Mackenzie Core Plus | BMO Short vs. Mackenzie Investment Grade | BMO Short vs. Mackenzie Core Plus |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
Other Complementary Tools
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges |