Correlation Between BMO Canadian and Vanguard FTSE
Can any of the company-specific risk be diversified away by investing in both BMO Canadian 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 Canadian 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 Canadian High and Vanguard FTSE Canadian, you can compare the effects of market volatilities on BMO Canadian 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 Canadian with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Canadian and Vanguard FTSE.
Diversification Opportunities for BMO Canadian and Vanguard FTSE
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BMO and Vanguard is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding BMO Canadian High and Vanguard FTSE Canadian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Canadian and BMO Canadian 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 Canadian High 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 Canadian has no effect on the direction of BMO Canadian i.e., BMO Canadian and Vanguard FTSE go up and down completely randomly.
Pair Corralation between BMO Canadian and Vanguard FTSE
Assuming the 90 days trading horizon BMO Canadian High is expected to generate 0.45 times more return on investment than Vanguard FTSE. However, BMO Canadian High is 2.21 times less risky than Vanguard FTSE. It trades about 0.4 of its potential returns per unit of risk. Vanguard FTSE Canadian is currently generating about 0.02 per unit of risk. If you would invest 1,792 in BMO Canadian High on September 1, 2024 and sell it today you would earn a total of 62.00 from holding BMO Canadian High or generate 3.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Canadian High vs. Vanguard FTSE Canadian
Performance |
| Timeline |
| BMO Canadian High |
| Vanguard FTSE Canadian |
BMO Canadian and Vanguard FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Canadian and Vanguard FTSE
The main advantage of trading using opposite BMO Canadian and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Canadian 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 Canadian vs. BMO Short Term Bond | BMO Canadian vs. BMO Canadian Bank | BMO Canadian vs. BMO Aggregate Bond | BMO Canadian vs. BMO Balanced ETF |
| Vanguard FTSE vs. Vanguard FTSE Canadian | Vanguard FTSE vs. iShares SPTSX Composite | Vanguard FTSE vs. iShares SPTSX Capped | Vanguard FTSE vs. BMO Equal Weight |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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