Correlation Between BMO Europe and IShares Core
Can any of the company-specific risk be diversified away by investing in both BMO Europe and IShares Core 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 Europe and IShares Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Europe High and iShares Core MSCI, you can compare the effects of market volatilities on BMO Europe and IShares Core 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 Europe with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Europe and IShares Core.
Diversification Opportunities for BMO Europe and IShares Core
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between BMO and IShares is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding BMO Europe High and iShares Core MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core MSCI and BMO Europe 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 Europe High are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core MSCI has no effect on the direction of BMO Europe i.e., BMO Europe and IShares Core go up and down completely randomly.
Pair Corralation between BMO Europe and IShares Core
Assuming the 90 days trading horizon BMO Europe High is expected to under-perform the IShares Core. But the etf apears to be less risky and, when comparing its historical volatility, BMO Europe High is 1.08 times less risky than IShares Core. The etf trades about -0.06 of its potential returns per unit of risk. The iShares Core MSCI is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 3,068 in iShares Core MSCI on August 25, 2024 and sell it today you would earn a total of 193.00 from holding iShares Core MSCI or generate 6.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Europe High vs. iShares Core MSCI
Performance |
| Timeline |
| BMO Europe High |
| iShares Core MSCI |
BMO Europe and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Europe and IShares Core
The main advantage of trading using opposite BMO Europe and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Europe position performs unexpectedly, IShares Core 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 Core will offset losses from the drop in IShares Core's long position.The idea behind BMO Europe High and iShares Core MSCI pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| IShares Core vs. BMO Europe High | IShares Core vs. BMO Covered Call | IShares Core vs. BMO Covered Call | IShares Core vs. BMO Europe High |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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