Correlation Between Vanguard Dividend and BMO High
Can any of the company-specific risk be diversified away by investing in both Vanguard Dividend 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 Dividend 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 Dividend Appreciation and BMO High Dividend, you can compare the effects of market volatilities on Vanguard Dividend 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 Dividend with a short position of BMO High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Dividend and BMO High.
Diversification Opportunities for Vanguard Dividend and BMO High
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and BMO is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Dividend Appreciation 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 Dividend 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 Dividend Appreciation 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 Dividend i.e., Vanguard Dividend and BMO High go up and down completely randomly.
Pair Corralation between Vanguard Dividend and BMO High
Assuming the 90 days trading horizon Vanguard Dividend is expected to generate 1.18 times less return on investment than BMO High. But when comparing it to its historical volatility, Vanguard Dividend Appreciation is 1.08 times less risky than BMO High. It trades about 0.22 of its potential returns per unit of risk. BMO High Dividend is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 2,452 in BMO High Dividend on November 1, 2024 and sell it today you would earn a total of 86.00 from holding BMO High Dividend or generate 3.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Dividend Appreciation vs. BMO High Dividend
Performance |
| Timeline |
| Vanguard Dividend |
| BMO High Dividend |
Vanguard Dividend and BMO High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Dividend and BMO High
The main advantage of trading using opposite Vanguard Dividend and BMO High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Dividend 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 Dividend vs. Vanguard Dividend Appreciation | Vanguard Dividend vs. Vanguard Total Market | Vanguard Dividend vs. Vanguard FTSE Developed | Vanguard Dividend vs. Vanguard FTSE Developed |
| BMO High vs. BMO Europe High | BMO High vs. BMO Covered Call | BMO High vs. BMO Covered Call | BMO High vs. BMO Europe High |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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