Correlation Between Vanguard Canadian and BMO MSCI
Can any of the company-specific risk be diversified away by investing in both Vanguard Canadian and BMO MSCI 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 Canadian and BMO MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Canadian Aggregate and BMO MSCI EAFE, you can compare the effects of market volatilities on Vanguard Canadian and BMO MSCI 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 Canadian with a short position of BMO MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Canadian and BMO MSCI.
Diversification Opportunities for Vanguard Canadian and BMO MSCI
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Vanguard and BMO is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Canadian Aggregate and BMO MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO MSCI EAFE and Vanguard 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 Vanguard Canadian Aggregate are associated (or correlated) with BMO MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO MSCI EAFE has no effect on the direction of Vanguard Canadian i.e., Vanguard Canadian and BMO MSCI go up and down completely randomly.
Pair Corralation between Vanguard Canadian and BMO MSCI
Assuming the 90 days trading horizon Vanguard Canadian Aggregate is expected to generate 0.69 times more return on investment than BMO MSCI. However, Vanguard Canadian Aggregate is 1.45 times less risky than BMO MSCI. It trades about 0.1 of its potential returns per unit of risk. BMO MSCI EAFE is currently generating about -0.06 per unit of risk. If you would invest 2,300 in Vanguard Canadian Aggregate on August 31, 2024 and sell it today you would earn a total of 21.00 from holding Vanguard Canadian Aggregate or generate 0.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Canadian Aggregate vs. BMO MSCI EAFE
Performance |
| Timeline |
| Vanguard Canadian |
| BMO MSCI EAFE |
Vanguard Canadian and BMO MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Canadian and BMO MSCI
The main advantage of trading using opposite Vanguard Canadian and BMO MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Canadian position performs unexpectedly, BMO MSCI 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 MSCI will offset losses from the drop in BMO MSCI's long position.| Vanguard Canadian vs. Vanguard Canadian Short | Vanguard Canadian vs. Vanguard FTSE Canada | Vanguard Canadian vs. Vanguard FTSE Global | Vanguard Canadian vs. Vanguard FTSE Emerging |
| BMO MSCI vs. Vanguard FTSE Emerging | BMO MSCI vs. Vanguard FTSE Developed | BMO MSCI vs. Vanguard Total Market | BMO MSCI 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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