Correlation Between Vanguard FTSE and BMO Dividend
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and BMO Dividend 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 Dividend into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard FTSE Global and BMO Dividend CAD, you can compare the effects of market volatilities on Vanguard FTSE and BMO Dividend 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 Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and BMO Dividend.
Diversification Opportunities for Vanguard FTSE and BMO Dividend
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and BMO is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Global and BMO Dividend CAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Dividend CAD 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 Global are associated (or correlated) with BMO Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Dividend CAD has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and BMO Dividend go up and down completely randomly.
Pair Corralation between Vanguard FTSE and BMO Dividend
Assuming the 90 days trading horizon Vanguard FTSE is expected to generate 1.0 times less return on investment than BMO Dividend. But when comparing it to its historical volatility, Vanguard FTSE Global is 1.25 times less risky than BMO Dividend. It trades about 0.33 of its potential returns per unit of risk. BMO Dividend CAD is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 3,054 in BMO Dividend CAD on September 1, 2024 and sell it today you would earn a total of 139.00 from holding BMO Dividend CAD or generate 4.55% 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 Global vs. BMO Dividend CAD
Performance |
| Timeline |
| Vanguard FTSE Global |
| BMO Dividend CAD |
Vanguard FTSE and BMO Dividend Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and BMO Dividend
The main advantage of trading using opposite Vanguard FTSE and BMO Dividend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, BMO Dividend 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 Dividend will offset losses from the drop in BMO Dividend's long position.| Vanguard FTSE vs. Vanguard FTSE Canada | Vanguard FTSE vs. Vanguard Canadian Aggregate | Vanguard FTSE vs. Vanguard Total Market | Vanguard FTSE vs. iShares Core MSCI |
| BMO Dividend vs. Vanguard Dividend Appreciation | BMO Dividend vs. Vanguard Total Market | BMO Dividend vs. Vanguard FTSE Emerging | BMO Dividend vs. Vanguard FTSE Global |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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