Correlation Between Vanguard Canadian and BMO High
Can any of the company-specific risk be diversified away by investing in both Vanguard Canadian 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 Canadian 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 Canadian Government and BMO High Yield, you can compare the effects of market volatilities on Vanguard Canadian 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 Canadian with a short position of BMO High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Canadian and BMO High.
Diversification Opportunities for Vanguard Canadian and BMO High
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vanguard and BMO is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Canadian Government and BMO High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO High Yield 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 Government 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 Yield has no effect on the direction of Vanguard Canadian i.e., Vanguard Canadian and BMO High go up and down completely randomly.
Pair Corralation between Vanguard Canadian and BMO High
Assuming the 90 days trading horizon Vanguard Canadian is expected to generate 2.94 times less return on investment than BMO High. In addition to that, Vanguard Canadian is 1.13 times more volatile than BMO High Yield. It trades about 0.07 of its total potential returns per unit of risk. BMO High Yield is currently generating about 0.24 per unit of volatility. If you would invest 1,876 in BMO High Yield on August 29, 2024 and sell it today you would earn a total of 38.00 from holding BMO High Yield or generate 2.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Canadian Government vs. BMO High Yield
Performance |
| Timeline |
| Vanguard Canadian |
| BMO High Yield |
Vanguard Canadian and BMO High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Canadian and BMO High
The main advantage of trading using opposite Vanguard Canadian and BMO High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Canadian 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 Canadian vs. Vanguard Canadian Corporate | Vanguard Canadian vs. Vanguard Canadian Long Term | Vanguard Canadian vs. Vanguard Canadian Short | Vanguard Canadian vs. Vanguard Canadian Short Term |
| BMO High vs. BMO High Yield | BMO High vs. BMO Preferred Share | BMO High vs. BMO Preferred Share | 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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