Correlation Between First Asset and BMO MSCI

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

By analyzing existing cross correlation between First Asset Morningstar and BMO MSCI Canada, you can compare the effects of market volatilities on First Asset 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 First Asset with a short position of BMO MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Asset and BMO MSCI.

Diversification Opportunities for First Asset and BMO MSCI

0.99

Correlation Coefficient

First Asset  BMO MSCI

No risk reduction

The 3 months correlation between First and BMO is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding First Asset Morningstar and BMO MSCI Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO MSCI Canada and First Asset 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 First Asset Morningstar 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 Canada has no effect on the direction of First Asset i.e., First Asset and BMO MSCI go up and down completely randomly.

Pair Corralation between First Asset and BMO MSCI

Assuming the 90 days trading horizon First Asset Morningstar is expected to generate 1.1 times more return on investment than BMO MSCI. However, First Asset is 1.1 times more volatile than BMO MSCI Canada. It trades about 0.46 of its potential returns per unit of risk. BMO MSCI Canada is currently generating about 0.43 per unit of risk. If you would invest  3,190  in First Asset Morningstar on April 21, 2025 and sell it today you would earn a total of  492.00  from holding First Asset Morningstar or generate 15.42% return on investment over 90 days.

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

First Asset Morningstar  vs.  BMO MSCI Canada

First Asset Morningstar

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in First Asset Morningstar are ranked lower than 36 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, First Asset displayed solid returns over the last few months and may actually be approaching a breakup point.

BMO MSCI Canada

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in BMO MSCI Canada are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, BMO MSCI may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with First Asset and BMO MSCI

The main advantage of trading using opposite First Asset and BMO MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Asset 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.

The idea behind First Asset Morningstar and BMO MSCI Canada 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.