Correlation Between BMO MSCI and BMO SIA
Can any of the company-specific risk be diversified away by investing in both BMO MSCI and BMO SIA 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 SIA 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 SIA Focused, you can compare the effects of market volatilities on BMO MSCI and BMO SIA 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 SIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO MSCI and BMO SIA.
Diversification Opportunities for BMO MSCI and BMO SIA
Almost no diversification
The 3 months correlation between BMO and BMO is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding BMO MSCI USA and BMO SIA Focused in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO SIA Focused 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 SIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO SIA Focused has no effect on the direction of BMO MSCI i.e., BMO MSCI and BMO SIA go up and down completely randomly.
Pair Corralation between BMO MSCI and BMO SIA
Assuming the 90 days trading horizon BMO MSCI USA is expected to generate 0.97 times more return on investment than BMO SIA. However, BMO MSCI USA is 1.04 times less risky than BMO SIA. It trades about 0.07 of its potential returns per unit of risk. BMO SIA Focused is currently generating about 0.05 per unit of risk. If you would invest 2,501 in BMO MSCI USA on September 4, 2024 and sell it today you would earn a total of 713.00 from holding BMO MSCI USA or generate 28.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO MSCI USA vs. BMO SIA Focused
Performance |
| Timeline |
| BMO MSCI USA |
| BMO SIA Focused |
BMO MSCI and BMO SIA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO MSCI and BMO SIA
The main advantage of trading using opposite BMO MSCI and BMO SIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO MSCI position performs unexpectedly, BMO SIA 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 SIA will offset losses from the drop in BMO SIA's long position.| BMO MSCI vs. BMO MSCI Canada | BMO MSCI vs. BMO Low Volatility | BMO MSCI vs. BMO Low Volatility | BMO MSCI vs. BMO MSCI All |
| BMO SIA vs. Mackenzie Large Cap | BMO SIA vs. Goldman Sachs ActiveBeta | BMO SIA vs. BMO MSCI EAFE | BMO SIA 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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