Correlation Between Vanguard Canadian and BMO Short
Can any of the company-specific risk be diversified away by investing in both Vanguard Canadian and BMO Short 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 Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Canadian Short and BMO Short Corporate, you can compare the effects of market volatilities on Vanguard Canadian and BMO Short 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 Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Canadian and BMO Short.
Diversification Opportunities for Vanguard Canadian and BMO Short
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and BMO is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Canadian Short and BMO Short Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Short Corporate 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 Short are associated (or correlated) with BMO Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Short Corporate has no effect on the direction of Vanguard Canadian i.e., Vanguard Canadian and BMO Short go up and down completely randomly.
Pair Corralation between Vanguard Canadian and BMO Short
Assuming the 90 days trading horizon Vanguard Canadian is expected to generate 1.35 times less return on investment than BMO Short. But when comparing it to its historical volatility, Vanguard Canadian Short is 1.14 times less risky than BMO Short. It trades about 0.1 of its potential returns per unit of risk. BMO Short Corporate is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,228 in BMO Short Corporate on August 29, 2024 and sell it today you would earn a total of 155.00 from holding BMO Short Corporate or generate 12.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Canadian Short vs. BMO Short Corporate
Performance |
| Timeline |
| Vanguard Canadian Short |
| BMO Short Corporate |
Vanguard Canadian and BMO Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Canadian and BMO Short
The main advantage of trading using opposite Vanguard Canadian and BMO Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Canadian position performs unexpectedly, BMO Short 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 Short will offset losses from the drop in BMO Short's long position.| Vanguard Canadian vs. Mackenzie Canadian Aggregate | Vanguard Canadian vs. Mackenzie Core Plus | Vanguard Canadian vs. Mackenzie Investment Grade | Vanguard Canadian vs. Mackenzie Core Plus |
| BMO Short vs. Mackenzie Canadian Aggregate | BMO Short vs. Mackenzie Core Plus | BMO Short vs. Mackenzie Investment Grade | BMO Short vs. Mackenzie Core Plus |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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