Correlation Between BMO SP and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both BMO SP 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 SP 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 SP 500 and iShares MSCI Min, you can compare the effects of market volatilities on BMO SP 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 SP with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SP and IShares MSCI.
Diversification Opportunities for BMO SP and IShares MSCI
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BMO and IShares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding BMO SP 500 and iShares MSCI Min in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Min and BMO SP 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 SP 500 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 Min has no effect on the direction of BMO SP i.e., BMO SP and IShares MSCI go up and down completely randomly.
Pair Corralation between BMO SP and IShares MSCI
Assuming the 90 days trading horizon BMO SP is expected to generate 1.06 times less return on investment than IShares MSCI. In addition to that, BMO SP is 1.53 times more volatile than iShares MSCI Min. It trades about 0.13 of its total potential returns per unit of risk. iShares MSCI Min is currently generating about 0.21 per unit of volatility. If you would invest 6,864 in iShares MSCI Min on August 25, 2024 and sell it today you would earn a total of 1,894 from holding iShares MSCI Min or generate 27.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO SP 500 vs. iShares MSCI Min
Performance |
| Timeline |
| BMO SP 500 |
| iShares MSCI Min |
BMO SP and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO SP and IShares MSCI
The main advantage of trading using opposite BMO SP and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO SP 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 SP vs. BMO MSCI EAFE | BMO SP vs. BMO Dow Jones | BMO SP vs. BMO SPTSX Capped | BMO SP vs. BMO MSCI Emerging |
| IShares MSCI vs. BMO SP 500 | IShares MSCI vs. Global X SP | IShares MSCI vs. BMO SP 500 | IShares MSCI vs. Vanguard SP 500 |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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