Correlation Between BMO MSCI and EcoSynthetix

Can any of the company-specific risk be diversified away by investing in both BMO MSCI and EcoSynthetix 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 EcoSynthetix into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BMO MSCI India and EcoSynthetix, you can compare the effects of market volatilities on BMO MSCI and EcoSynthetix 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 EcoSynthetix. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO MSCI and EcoSynthetix.

Diversification Opportunities for BMO MSCI and EcoSynthetix

0.52

Correlation Coefficient

BMO MSCI  EcoSynthetix

Very weak diversification

The 3 months correlation between BMO and EcoSynthetix is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding BMO MSCI India and EcoSynthetix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EcoSynthetix 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 India are associated (or correlated) with EcoSynthetix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EcoSynthetix has no effect on the direction of BMO MSCI i.e., BMO MSCI and EcoSynthetix go up and down completely randomly.

Pair Corralation between BMO MSCI and EcoSynthetix

Assuming the 90 days trading horizon BMO MSCI India is expected to generate 0.37 times more return on investment than EcoSynthetix. However, BMO MSCI India is 2.71 times less risky than EcoSynthetix. It trades about 0.12 of its potential returns per unit of risk. EcoSynthetix is currently generating about 0.04 per unit of risk. If you would invest  4,037  in BMO MSCI India on September 14, 2024 and sell it today you would earn a total of  1,218  from holding BMO MSCI India or generate 30.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

BMO MSCI India  vs.  EcoSynthetix

BMO MSCI India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BMO MSCI India has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, BMO MSCI is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

EcoSynthetix

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EcoSynthetix has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, EcoSynthetix is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BMO MSCI and EcoSynthetix

The main advantage of trading using opposite BMO MSCI and EcoSynthetix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO MSCI position performs unexpectedly, EcoSynthetix 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 EcoSynthetix will offset losses from the drop in EcoSynthetix's long position.

The idea behind BMO MSCI India and EcoSynthetix 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.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.