Correlation Between BMO MSCI and BMO Dividend
Can any of the company-specific risk be diversified away by investing in both BMO MSCI and BMO Dividend 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 Dividend 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 Dividend CAD, you can compare the effects of market volatilities on BMO MSCI and BMO Dividend 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 Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO MSCI and BMO Dividend.
Diversification Opportunities for BMO MSCI and BMO Dividend
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BMO and BMO is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding BMO MSCI USA and BMO Dividend CAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Dividend CAD 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 Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Dividend CAD has no effect on the direction of BMO MSCI i.e., BMO MSCI and BMO Dividend go up and down completely randomly.
Pair Corralation between BMO MSCI and BMO Dividend
Assuming the 90 days trading horizon BMO MSCI USA is expected to generate 1.3 times more return on investment than BMO Dividend. However, BMO MSCI is 1.3 times more volatile than BMO Dividend CAD. It trades about 0.21 of its potential returns per unit of risk. BMO Dividend CAD is currently generating about 0.11 per unit of risk. If you would invest 2,835 in BMO MSCI USA on September 12, 2024 and sell it today you would earn a total of 311.00 from holding BMO MSCI USA or generate 10.97% 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 Dividend CAD
Performance |
| Timeline |
| BMO MSCI USA |
| BMO Dividend CAD |
BMO MSCI and BMO Dividend Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO MSCI and BMO Dividend
The main advantage of trading using opposite BMO MSCI and BMO Dividend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO MSCI position performs unexpectedly, BMO Dividend 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 Dividend will offset losses from the drop in BMO Dividend'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 Dividend vs. BMO Short Term Bond | BMO Dividend vs. BMO Canadian Bank | BMO Dividend vs. BMO Aggregate Bond | BMO Dividend vs. BMO Balanced ETF |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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