Correlation Between BMO MSCI and BetaPro NASDAQ

Can any of the company-specific risk be diversified away by investing in both BMO MSCI and BetaPro NASDAQ 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 BetaPro NASDAQ 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 BetaPro NASDAQ 100 2x, you can compare the effects of market volatilities on BMO MSCI and BetaPro NASDAQ 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 BetaPro NASDAQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO MSCI and BetaPro NASDAQ.

Diversification Opportunities for BMO MSCI and BetaPro NASDAQ

-0.96

Correlation Coefficient

BMO MSCI  BetaPro NASDAQ

Pay attention - limited upside

The 3 months correlation between BMO and BetaPro is -0.96. Overlapping area represents the amount of risk that can be diversified away by holding BMO MSCI USA and BetaPro NASDAQ 100 2x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaPro NASDAQ 100 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 BetaPro NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaPro NASDAQ 100 has no effect on the direction of BMO MSCI i.e., BMO MSCI and BetaPro NASDAQ go up and down completely randomly.

Pair Corralation between BMO MSCI and BetaPro NASDAQ

Assuming the 90 days trading horizon BMO MSCI USA is expected to generate 0.36 times more return on investment than BetaPro NASDAQ. However, BMO MSCI USA is 2.76 times less risky than BetaPro NASDAQ. It trades about 0.15 of its potential returns per unit of risk. BetaPro NASDAQ 100 2x is currently generating about -0.07 per unit of risk. If you would invest  6,130  in BMO MSCI USA on September 13, 2024 and sell it today you would earn a total of  2,983  from holding BMO MSCI USA or generate 48.66% return on investment over 90 days.

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

BMO MSCI USA  vs.  BetaPro NASDAQ 100 2x

BMO MSCI USA

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO MSCI USA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BetaPro NASDAQ 100

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BetaPro NASDAQ 100 2x has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with BMO MSCI and BetaPro NASDAQ

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

The idea behind BMO MSCI USA and BetaPro NASDAQ 100 2x 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.