Correlation Between BMO Europe and BMO MSCI
Can any of the company-specific risk be diversified away by investing in both BMO Europe and BMO 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 Europe and BMO MSCI 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 BMO MSCI Europe, you can compare the effects of market volatilities on BMO Europe and BMO 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 Europe with a short position of BMO MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Europe and BMO MSCI.
Diversification Opportunities for BMO Europe and BMO MSCI
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BMO and BMO is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding BMO Europe High and BMO MSCI Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO MSCI Europe 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 BMO MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO MSCI Europe has no effect on the direction of BMO Europe i.e., BMO Europe and BMO MSCI go up and down completely randomly.
Pair Corralation between BMO Europe and BMO MSCI
Assuming the 90 days trading horizon BMO Europe High is expected to under-perform the BMO MSCI. But the etf apears to be less risky and, when comparing its historical volatility, BMO Europe High is 1.13 times less risky than BMO MSCI. The etf trades about -0.16 of its potential returns per unit of risk. The BMO MSCI Europe is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 3,042 in BMO MSCI Europe on August 31, 2024 and sell it today you would lose (52.00) from holding BMO MSCI Europe or give up 1.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
BMO Europe High vs. BMO MSCI Europe
Performance |
| Timeline |
| BMO Europe High |
| BMO MSCI Europe |
BMO Europe and BMO MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Europe and BMO MSCI
The main advantage of trading using opposite BMO Europe and BMO MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Europe position performs unexpectedly, BMO 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 BMO MSCI will offset losses from the drop in BMO MSCI's long position.| BMO Europe vs. BMO Covered Call | BMO Europe vs. BMO High Dividend | BMO Europe vs. BMO Europe High | BMO Europe vs. BMO Covered Call |
| BMO MSCI vs. BMO Europe High | BMO MSCI vs. BMO High Dividend | BMO MSCI vs. BMO Covered Call | BMO MSCI vs. BMO Global 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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