Correlation Between Vanguard FTSE and BMO SIA
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and BMO SIA 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 SIA 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 SIA Focused, you can compare the effects of market volatilities on Vanguard FTSE and BMO SIA 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 SIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and BMO SIA.
Diversification Opportunities for Vanguard FTSE and BMO SIA
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and BMO is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Canada and BMO SIA Focused in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO SIA Focused 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 SIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO SIA Focused has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and BMO SIA go up and down completely randomly.
Pair Corralation between Vanguard FTSE and BMO SIA
Assuming the 90 days trading horizon Vanguard FTSE Canada is expected to generate 0.7 times more return on investment than BMO SIA. However, Vanguard FTSE Canada is 1.43 times less risky than BMO SIA. It trades about 0.42 of its potential returns per unit of risk. BMO SIA Focused is currently generating about 0.21 per unit of risk. If you would invest 5,075 in Vanguard FTSE Canada on September 12, 2024 and sell it today you would earn a total of 195.00 from holding Vanguard FTSE Canada or generate 3.84% 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 SIA Focused
Performance |
| Timeline |
| Vanguard FTSE Canada |
| BMO SIA Focused |
Vanguard FTSE and BMO SIA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and BMO SIA
The main advantage of trading using opposite Vanguard FTSE and BMO SIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, BMO SIA 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 SIA will offset losses from the drop in BMO SIA's long position.| Vanguard FTSE vs. iShares Core MSCI | Vanguard FTSE vs. Vanguard Total Market | Vanguard FTSE vs. iShares Core SP | Vanguard FTSE vs. Vanguard Canadian Aggregate |
| BMO SIA vs. BMO SIA Focused | BMO SIA vs. BMO MSCI USA | BMO SIA vs. BMO MSCI Canada | BMO SIA 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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