Correlation Between Vanguard FTSE and BMO MSCI
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE 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 Vanguard FTSE and BMO MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard FTSE Canada and BMO MSCI Canada, you can compare the effects of market volatilities on Vanguard FTSE 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 Vanguard FTSE with a short position of BMO MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and BMO MSCI.
Diversification Opportunities for Vanguard FTSE and BMO MSCI
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and BMO is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Canada 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 Vanguard FTSE 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 Vanguard FTSE Canada 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 Vanguard FTSE i.e., Vanguard FTSE and BMO MSCI go up and down completely randomly.
Pair Corralation between Vanguard FTSE and BMO MSCI
Assuming the 90 days trading horizon Vanguard FTSE Canada is expected to generate 0.85 times more return on investment than BMO MSCI. However, Vanguard FTSE Canada is 1.18 times less risky than BMO MSCI. It trades about 0.22 of its potential returns per unit of risk. BMO MSCI Canada is currently generating about 0.12 per unit of risk. If you would invest 4,783 in Vanguard FTSE Canada on September 1, 2024 and sell it today you would earn a total of 890.00 from holding Vanguard FTSE Canada or generate 18.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Vanguard FTSE Canada vs. BMO MSCI Canada
Performance |
| Timeline |
| Vanguard FTSE Canada |
| BMO MSCI Canada |
Vanguard FTSE and BMO MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and BMO MSCI
The main advantage of trading using opposite Vanguard FTSE and BMO MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE 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.| Vanguard FTSE vs. Vanguard FTSE Developed | Vanguard FTSE vs. Vanguard FTSE Emerging | Vanguard FTSE vs. Vanguard Total Market | Vanguard FTSE vs. Vanguard Canadian Aggregate |
| BMO MSCI vs. BMO MSCI USA | BMO MSCI vs. BMO Low Volatility | BMO MSCI vs. BMO International Dividend | BMO MSCI vs. BMO Low Volatility |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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