Correlation Between Vanguard and BMO MSCI
Can any of the company-specific risk be diversified away by investing in both Vanguard 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 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 SP 500 and BMO MSCI USA, you can compare the effects of market volatilities on Vanguard 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 with a short position of BMO MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and BMO MSCI.
Diversification Opportunities for Vanguard and BMO MSCI
Almost no diversification
The 3 months correlation between Vanguard and BMO is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and BMO MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO MSCI USA 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 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 USA has no effect on the direction of Vanguard i.e., Vanguard and BMO MSCI go up and down completely randomly.
Pair Corralation between Vanguard and BMO MSCI
Assuming the 90 days trading horizon Vanguard is expected to generate 1.16 times less return on investment than BMO MSCI. But when comparing it to its historical volatility, Vanguard SP 500 is 1.1 times less risky than BMO MSCI. It trades about 0.14 of its potential returns per unit of risk. BMO MSCI USA is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 5,292 in BMO MSCI USA on November 2, 2024 and sell it today you would earn a total of 4,021 from holding BMO MSCI USA or generate 75.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard SP 500 vs. BMO MSCI USA
Performance |
| Timeline |
| Vanguard SP 500 |
| BMO MSCI USA |
Vanguard and BMO MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and BMO MSCI
The main advantage of trading using opposite Vanguard and BMO MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 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 vs. Vanguard FTSE Canadian | Vanguard vs. Vanguard Growth Portfolio | Vanguard vs. Vanguard SP 500 | Vanguard vs. Vanguard FTSE Canada |
| BMO MSCI vs. BMO MSCI All | BMO MSCI vs. BMO Low Volatility | BMO MSCI vs. BMO MSCI Europe | BMO MSCI vs. BMO MSCI Emerging |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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