Correlation Between BMO Target and BMO MSCI
Can any of the company-specific risk be diversified away by investing in both BMO Target 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 Target 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 Target 2027 and BMO MSCI EAFE, you can compare the effects of market volatilities on BMO Target 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 Target with a short position of BMO MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Target and BMO MSCI.
Diversification Opportunities for BMO Target and BMO MSCI
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BMO and BMO is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding BMO Target 2027 and BMO MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO MSCI EAFE and BMO Target 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 Target 2027 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 EAFE has no effect on the direction of BMO Target i.e., BMO Target and BMO MSCI go up and down completely randomly.
Pair Corralation between BMO Target and BMO MSCI
Assuming the 90 days trading horizon BMO Target is expected to generate 3.96 times less return on investment than BMO MSCI. But when comparing it to its historical volatility, BMO Target 2027 is 5.01 times less risky than BMO MSCI. It trades about 0.15 of its potential returns per unit of risk. BMO MSCI EAFE is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3,277 in BMO MSCI EAFE on September 9, 2025 and sell it today you would earn a total of 170.00 from holding BMO MSCI EAFE or generate 5.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.44% |
| Values | Daily Returns |
BMO Target 2027 vs. BMO MSCI EAFE
Performance |
| Timeline |
| BMO Target 2027 |
| BMO MSCI EAFE |
BMO Target and BMO MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Target and BMO MSCI
The main advantage of trading using opposite BMO Target and BMO MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Target 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 Target vs. iShares SPTSX 60 | BMO Target vs. iShares Core SP | BMO Target vs. iShares Core SPTSX | BMO Target vs. BMO Aggregate Bond |
| BMO MSCI vs. Invesco RAFI Canadian | BMO MSCI vs. iShares MSCI Min | BMO MSCI vs. iShares ESG Equity | BMO MSCI vs. iShares High Dividend |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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