Correlation Between Vanguard FTSE and BMO SPTSX

Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and BMO SPTSX 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 SPTSX into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard FTSE Canadian and BMO SPTSX Equal, you can compare the effects of market volatilities on Vanguard FTSE and BMO SPTSX 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 SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and BMO SPTSX.

Diversification Opportunities for Vanguard FTSE and BMO SPTSX

0.0

Correlation Coefficient

Vanguard FTSE  BMO SPTSX

Pay attention - limited upside

The 3 months correlation between Vanguard and BMO is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Canadian and BMO SPTSX Equal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO SPTSX Equal 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 Canadian are associated (or correlated) with BMO SPTSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO SPTSX Equal has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and BMO SPTSX go up and down completely randomly.

Pair Corralation between Vanguard FTSE and BMO SPTSX

If you would invest  4,004  in BMO SPTSX Equal on October 7, 2024 and sell it today you would earn a total of  224.00  from holding BMO SPTSX Equal or generate 5.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.61%
Values	Daily Returns

Vanguard FTSE Canadian  vs.  BMO SPTSX Equal

Vanguard FTSE Canadian

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard FTSE Canadian has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Vanguard FTSE is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

BMO SPTSX Equal

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO SPTSX Equal are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, BMO SPTSX is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vanguard FTSE and BMO SPTSX

The main advantage of trading using opposite Vanguard FTSE and BMO SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, BMO SPTSX 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 SPTSX will offset losses from the drop in BMO SPTSX's long position.

The idea behind Vanguard FTSE Canadian and BMO SPTSX Equal pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.