Correlation Between Vanguard and BMO High
Can any of the company-specific risk be diversified away by investing in both Vanguard and BMO High 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 High 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 High Dividend, you can compare the effects of market volatilities on Vanguard and BMO High 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 High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and BMO High.
Diversification Opportunities for Vanguard and BMO High
Very good diversification
The 3 months correlation between Vanguard and BMO is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and BMO High Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO High Dividend 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 High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO High Dividend has no effect on the direction of Vanguard i.e., Vanguard and BMO High go up and down completely randomly.
Pair Corralation between Vanguard and BMO High
Assuming the 90 days trading horizon Vanguard SP 500 is expected to generate 1.35 times more return on investment than BMO High. However, Vanguard is 1.35 times more volatile than BMO High Dividend. It trades about -0.01 of its potential returns per unit of risk. BMO High Dividend is currently generating about -0.32 per unit of risk. If you would invest 15,206 in Vanguard SP 500 on October 9, 2024 and sell it today you would lose (29.00) from holding Vanguard SP 500 or give up 0.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard SP 500 vs. BMO High Dividend
Performance |
| Timeline |
| Vanguard SP 500 |
| BMO High Dividend |
Vanguard and BMO High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and BMO High
The main advantage of trading using opposite Vanguard and BMO High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard position performs unexpectedly, BMO High 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 High will offset losses from the drop in BMO High's long position.| Vanguard vs. Vanguard FTSE Canadian | Vanguard vs. Vanguard Growth Portfolio | Vanguard vs. Vanguard SP 500 | Vanguard vs. Vanguard FTSE Canada |
| BMO High vs. BMO Europe High | BMO High vs. BMO Global High | BMO High vs. BMO Covered Call | BMO High vs. BMO Put Write |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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