Correlation Between BMO MSCI and BMO Long
Can any of the company-specific risk be diversified away by investing in both BMO MSCI and BMO Long 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 MSCI and BMO Long into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO MSCI USA and BMO Long Federal, you can compare the effects of market volatilities on BMO MSCI and BMO Long 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 MSCI with a short position of BMO Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO MSCI and BMO Long.
Diversification Opportunities for BMO MSCI and BMO Long
Excellent diversification
The 3 months correlation between BMO and BMO is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding BMO MSCI USA and BMO Long Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Long Federal and BMO MSCI 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 MSCI USA are associated (or correlated) with BMO Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Long Federal has no effect on the direction of BMO MSCI i.e., BMO MSCI and BMO Long go up and down completely randomly.
Pair Corralation between BMO MSCI and BMO Long
Assuming the 90 days trading horizon BMO MSCI USA is expected to generate 0.94 times more return on investment than BMO Long. However, BMO MSCI USA is 1.06 times less risky than BMO Long. It trades about 0.2 of its potential returns per unit of risk. BMO Long Federal is currently generating about 0.03 per unit of risk. If you would invest 8,163 in BMO MSCI USA on September 3, 2024 and sell it today you would earn a total of 797.00 from holding BMO MSCI USA or generate 9.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO MSCI USA vs. BMO Long Federal
Performance |
| Timeline |
| BMO MSCI USA |
| BMO Long Federal |
BMO MSCI and BMO Long Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO MSCI and BMO Long
The main advantage of trading using opposite BMO MSCI and BMO Long positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO MSCI position performs unexpectedly, BMO Long 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 Long will offset losses from the drop in BMO Long's long position.| BMO MSCI vs. BMO MSCI All | BMO MSCI vs. BMO Low Volatility | BMO MSCI vs. BMO MSCI Europe | BMO MSCI vs. BMO MSCI Emerging |
| BMO Long vs. iShares MSCI Emerging | BMO Long vs. iShares MSCI Global | BMO Long vs. iShares Core Canadian | BMO Long 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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