Correlation Between Vanguard FTSE and BMO SPTSX
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and BMO SPTSX 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 SPTSX 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 SPTSX Capped, you can compare the effects of market volatilities on Vanguard FTSE and BMO SPTSX 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 SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and BMO SPTSX.
Diversification Opportunities for Vanguard FTSE and BMO SPTSX
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and BMO is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Canada and BMO SPTSX Capped in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO SPTSX Capped 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 SPTSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO SPTSX Capped has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and BMO SPTSX go up and down completely randomly.
Pair Corralation between Vanguard FTSE and BMO SPTSX
Assuming the 90 days trading horizon Vanguard FTSE Canada is expected to generate 0.99 times more return on investment than BMO SPTSX. However, Vanguard FTSE Canada is 1.01 times less risky than BMO SPTSX. It trades about 0.1 of its potential returns per unit of risk. BMO SPTSX Capped is currently generating about 0.1 per unit of risk. If you would invest 3,800 in Vanguard FTSE Canada on August 28, 2024 and sell it today you would earn a total of 1,414 from holding Vanguard FTSE Canada or generate 37.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE Canada vs. BMO SPTSX Capped
Performance |
| Timeline |
| Vanguard FTSE Canada |
| BMO SPTSX Capped |
Vanguard FTSE and BMO SPTSX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and BMO SPTSX
The main advantage of trading using opposite Vanguard FTSE and BMO SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, BMO SPTSX 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 SPTSX will offset losses from the drop in BMO SPTSX's long position.| Vanguard FTSE vs. iShares SPTSX 60 | Vanguard FTSE vs. iShares Core SP | Vanguard FTSE vs. iShares SPTSX Composite | Vanguard FTSE vs. iShares Core MSCI |
| BMO SPTSX vs. iShares SPTSX 60 | BMO SPTSX vs. iShares Core SP | BMO SPTSX vs. iShares SPTSX Composite | BMO SPTSX vs. iShares Core MSCI |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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