Correlation Between BMO Europe and Vanguard FTSE
Can any of the company-specific risk be diversified away by investing in both BMO Europe 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 Europe 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 Europe High and Vanguard FTSE Developed, you can compare the effects of market volatilities on BMO Europe 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 Europe with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Europe and Vanguard FTSE.
Diversification Opportunities for BMO Europe and Vanguard FTSE
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BMO and Vanguard is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding BMO Europe High 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 Europe 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 Europe 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 Developed has no effect on the direction of BMO Europe i.e., BMO Europe and Vanguard FTSE go up and down completely randomly.
Pair Corralation between BMO Europe and Vanguard FTSE
Assuming the 90 days trading horizon BMO Europe is expected to generate 1.17 times less return on investment than Vanguard FTSE. In addition to that, BMO Europe is 1.05 times more volatile than Vanguard FTSE Developed. It trades about 0.05 of its total potential returns per unit of risk. Vanguard FTSE Developed is currently generating about 0.06 per unit of volatility. If you would invest 3,019 in Vanguard FTSE Developed on August 28, 2024 and sell it today you would earn a total of 496.00 from holding Vanguard FTSE Developed or generate 16.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Europe High vs. Vanguard FTSE Developed
Performance |
| Timeline |
| BMO Europe High |
| Vanguard FTSE Developed |
BMO Europe and Vanguard FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Europe and Vanguard FTSE
The main advantage of trading using opposite BMO Europe and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Europe 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 Europe vs. BMO Europe High | BMO Europe vs. BMO High Dividend | BMO Europe vs. BMO Covered Call | BMO Europe vs. BMO Global High |
| Vanguard FTSE vs. Vanguard FTSE Developed | Vanguard FTSE vs. Vanguard FTSE Emerging | Vanguard FTSE vs. Vanguard FTSE Developed | Vanguard FTSE vs. Vanguard Dividend Appreciation |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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