Correlation Between BMO Equal and BMO MSCI
Can any of the company-specific risk be diversified away by investing in both BMO Equal 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 Equal 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 Equal Weight and BMO MSCI China, you can compare the effects of market volatilities on BMO Equal 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 Equal with a short position of BMO MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Equal and BMO MSCI.
Diversification Opportunities for BMO Equal and BMO MSCI
Average diversification
The 3 months correlation between BMO and BMO is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding BMO Equal Weight and BMO MSCI China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO MSCI China and BMO Equal 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 Equal Weight 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 China has no effect on the direction of BMO Equal i.e., BMO Equal and BMO MSCI go up and down completely randomly.
Pair Corralation between BMO Equal and BMO MSCI
Assuming the 90 days trading horizon BMO Equal Weight is expected to generate 1.53 times more return on investment than BMO MSCI. However, BMO Equal is 1.53 times more volatile than BMO MSCI China. It trades about 0.23 of its potential returns per unit of risk. BMO MSCI China is currently generating about -0.09 per unit of risk. If you would invest 3,126 in BMO Equal Weight on September 1, 2024 and sell it today you would earn a total of 431.00 from holding BMO Equal Weight or generate 13.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
BMO Equal Weight vs. BMO MSCI China
Performance |
| Timeline |
| BMO Equal Weight |
| BMO MSCI China |
BMO Equal and BMO MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Equal and BMO MSCI
The main advantage of trading using opposite BMO Equal and BMO MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Equal 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 Equal vs. BMO Equal Weight | BMO Equal vs. BMO Equal Weight | BMO Equal vs. BMO SPTSX Equal | BMO Equal vs. BMO Equal Weight |
| BMO MSCI vs. iShares China | BMO MSCI vs. BMO MSCI India | BMO MSCI vs. BMO MSCI Emerging | BMO MSCI vs. BMO NASDAQ 100 |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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