Correlation Between Vanguard FTSE and BMO International
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and BMO International 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 International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard FTSE Developed and BMO International Dividend, you can compare the effects of market volatilities on Vanguard FTSE and BMO International 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 International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and BMO International.
Diversification Opportunities for Vanguard FTSE and BMO International
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and BMO is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and BMO International Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO International 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 Developed are associated (or correlated) with BMO International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO International has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and BMO International go up and down completely randomly.
Pair Corralation between Vanguard FTSE and BMO International
Assuming the 90 days trading horizon Vanguard FTSE Developed is expected to under-perform the BMO International. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard FTSE Developed is 1.47 times less risky than BMO International. The etf trades about -0.11 of its potential returns per unit of risk. The BMO International Dividend is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 2,731 in BMO International Dividend on August 25, 2024 and sell it today you would lose (32.00) from holding BMO International Dividend or give up 1.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE Developed vs. BMO International Dividend
Performance |
| Timeline |
| Vanguard FTSE Developed |
| BMO International |
Vanguard FTSE and BMO International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and BMO International
The main advantage of trading using opposite Vanguard FTSE and BMO International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, BMO International 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 International will offset losses from the drop in BMO International's long position.| Vanguard FTSE vs. iShares Core MSCI | Vanguard FTSE vs. Vanguard FTSE Developed | Vanguard FTSE vs. iShares MSCI EAFE | Vanguard FTSE vs. iShares Core MSCI |
| BMO International vs. iShares Core MSCI | BMO International vs. Vanguard FTSE Developed | BMO International vs. iShares MSCI EAFE | BMO International 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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