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 Developed and BMO MSCI Europe, 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
0.95 | 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 Developed and BMO MSCI Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO MSCI Europe 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 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 Europe 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 horizon Vanguard FTSE Developed is expected to generate 1.01 times more return on investment than BMO MSCI. However, Vanguard FTSE is 1.01 times more volatile than BMO MSCI Europe. It trades about 0.15 of its potential returns per unit of risk. BMO MSCI Europe is currently generating about 0.11 per unit of risk. If you would invest 3,594 in Vanguard FTSE Developed on November 2, 2024 and sell it today you would earn a total of 233.00 from holding Vanguard FTSE Developed or generate 6.48% 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 Developed vs. BMO MSCI Europe
Performance |
| Timeline |
| Vanguard FTSE Developed |
| BMO MSCI Europe |
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 FTSE Developed | Vanguard FTSE vs. Vanguard Dividend Appreciation |
| BMO MSCI vs. BMO MSCI All | BMO MSCI vs. BMO MSCI USA | BMO MSCI vs. BMO MSCI Emerging | BMO MSCI vs. BMO MSCI EAFE |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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