Correlation Between BMO International and Vanguard FTSE
Can any of the company-specific risk be diversified away by investing in both BMO International and Vanguard FTSE 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 BMO International and Vanguard FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO International Dividend and Vanguard FTSE Developed, you can compare the effects of market volatilities on BMO International and Vanguard FTSE 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 BMO International with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO International and Vanguard FTSE.
Diversification Opportunities for BMO International and Vanguard FTSE
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BMO and Vanguard is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding BMO International Dividend and Vanguard FTSE Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Developed and BMO International 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 BMO International Dividend are associated (or correlated) with Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Developed has no effect on the direction of BMO International i.e., BMO International and Vanguard FTSE go up and down completely randomly.
Pair Corralation between BMO International and Vanguard FTSE
Assuming the 90 days trading horizon BMO International Dividend is expected to under-perform the Vanguard FTSE. In addition to that, BMO International is 1.39 times more volatile than Vanguard FTSE Developed. It trades about -0.16 of its total potential returns per unit of risk. Vanguard FTSE Developed is currently generating about -0.16 per unit of volatility. If you would invest 3,508 in Vanguard FTSE Developed on August 29, 2024 and sell it today you would lose (77.00) from holding Vanguard FTSE Developed or give up 2.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO International Dividend vs. Vanguard FTSE Developed
Performance |
| Timeline |
| BMO International |
| Vanguard FTSE Developed |
BMO International and Vanguard FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO International and Vanguard FTSE
The main advantage of trading using opposite BMO International and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO International position performs unexpectedly, Vanguard FTSE 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 Vanguard FTSE will offset losses from the drop in Vanguard FTSE's long position.| BMO International vs. BMO Short Term Bond | BMO International vs. BMO Canadian Bank | BMO International vs. BMO Aggregate Bond | BMO International vs. BMO Balanced ETF |
| Vanguard FTSE vs. Vanguard FTSE Emerging | Vanguard FTSE vs. Vanguard Total Market | Vanguard FTSE vs. Vanguard FTSE Canada | Vanguard FTSE 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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