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 Emerging and BMO MSCI EAFE, 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
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Vanguard and BMO is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Emerging and BMO MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO MSCI EAFE 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 Emerging 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 EAFE 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 Emerging is expected to under-perform the BMO MSCI. In addition to that, Vanguard FTSE is 1.27 times more volatile than BMO MSCI EAFE. It trades about -0.11 of its total potential returns per unit of risk. BMO MSCI EAFE is currently generating about -0.06 per unit of volatility. If you would invest 2,328 in BMO MSCI EAFE on August 31, 2024 and sell it today you would lose (19.00) from holding BMO MSCI EAFE or give up 0.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE Emerging vs. BMO MSCI EAFE
Performance |
| Timeline |
| Vanguard FTSE Emerging |
| BMO MSCI EAFE |
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 Total Market | Vanguard FTSE vs. Vanguard FTSE Canada | Vanguard FTSE vs. Vanguard Canadian Aggregate |
| BMO MSCI vs. Vanguard FTSE Emerging | BMO MSCI vs. Vanguard FTSE Developed | BMO MSCI vs. Vanguard Total Market | BMO MSCI vs. Vanguard Canadian Aggregate |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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