Correlation Between Vanguard and BMO Real
Can any of the company-specific risk be diversified away by investing in both Vanguard and BMO Real 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 and BMO Real into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard SP 500 and BMO Real Return, you can compare the effects of market volatilities on Vanguard and BMO Real 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 with a short position of BMO Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and BMO Real.
Diversification Opportunities for Vanguard and BMO Real
Very good diversification
The 3 months correlation between Vanguard and BMO is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and BMO Real Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Real Return and Vanguard 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 SP 500 are associated (or correlated) with BMO Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Real Return has no effect on the direction of Vanguard i.e., Vanguard and BMO Real go up and down completely randomly.
Pair Corralation between Vanguard and BMO Real
Assuming the 90 days trading horizon Vanguard SP 500 is expected to generate 1.95 times more return on investment than BMO Real. However, Vanguard is 1.95 times more volatile than BMO Real Return. It trades about 0.18 of its potential returns per unit of risk. BMO Real Return is currently generating about -0.08 per unit of risk. If you would invest 14,278 in Vanguard SP 500 on August 25, 2024 and sell it today you would earn a total of 539.00 from holding Vanguard SP 500 or generate 3.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard SP 500 vs. BMO Real Return
Performance |
| Timeline |
| Vanguard SP 500 |
| BMO Real Return |
Vanguard and BMO Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and BMO Real
The main advantage of trading using opposite Vanguard and BMO Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard position performs unexpectedly, BMO Real 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 Real will offset losses from the drop in BMO Real's long position.| Vanguard vs. Vanguard FTSE Canadian | Vanguard vs. Vanguard Growth Portfolio | Vanguard vs. Vanguard SP 500 | Vanguard vs. Vanguard FTSE Canada |
| BMO Real vs. BMO Long Corporate | BMO Real vs. BMO Short Provincial | BMO Real vs. BMO Short Federal | BMO Real vs. BMO Emerging Markets |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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