Correlation Between BMO MSCI and BMO Discount
Can any of the company-specific risk be diversified away by investing in both BMO MSCI and BMO Discount 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 Discount into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO MSCI EAFE and BMO Discount Bond, you can compare the effects of market volatilities on BMO MSCI and BMO Discount 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 Discount. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO MSCI and BMO Discount.
Diversification Opportunities for BMO MSCI and BMO Discount
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between BMO and BMO is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding BMO MSCI EAFE and BMO Discount Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Discount Bond 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 EAFE are associated (or correlated) with BMO Discount. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Discount Bond has no effect on the direction of BMO MSCI i.e., BMO MSCI and BMO Discount go up and down completely randomly.
Pair Corralation between BMO MSCI and BMO Discount
Assuming the 90 days trading horizon BMO MSCI EAFE is expected to generate 1.65 times more return on investment than BMO Discount. However, BMO MSCI is 1.65 times more volatile than BMO Discount Bond. It trades about 0.07 of its potential returns per unit of risk. BMO Discount Bond is currently generating about 0.01 per unit of risk. If you would invest 2,921 in BMO MSCI EAFE on September 18, 2024 and sell it today you would earn a total of 79.00 from holding BMO MSCI EAFE or generate 2.7% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
BMO MSCI EAFE vs. BMO Discount Bond
Performance |
Timeline |
BMO MSCI EAFE |
BMO Discount Bond |
BMO MSCI and BMO Discount Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BMO MSCI and BMO Discount
The main advantage of trading using opposite BMO MSCI and BMO Discount positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO MSCI position performs unexpectedly, BMO Discount 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 Discount will offset losses from the drop in BMO Discount's long position.BMO MSCI vs. iShares Core MSCI | BMO MSCI vs. iShares MSCI EAFE | BMO MSCI vs. Wealthsimple Developed Markets | BMO MSCI vs. BMO Low Volatility |
BMO Discount vs. iShares Core Canadian | BMO Discount vs. iShares Core Canadian | BMO Discount vs. iShares Canadian Real | BMO Discount vs. iShares Canadian Value |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
Other Complementary Tools
Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
CEOs Directory Screen CEOs from public companies around the world | |
Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio |