Correlation Between Vanguard Total and BMO MSCI
Can any of the company-specific risk be diversified away by investing in both Vanguard Total 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 Total 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 Total Market and BMO MSCI USA, you can compare the effects of market volatilities on Vanguard Total 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 Total with a short position of BMO MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and BMO MSCI.
Diversification Opportunities for Vanguard Total and BMO MSCI
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and BMO is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Market 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 Total 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 Total Market 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 Total i.e., Vanguard Total and BMO MSCI go up and down completely randomly.
Pair Corralation between Vanguard Total and BMO MSCI
Assuming the 90 days trading horizon Vanguard Total is expected to generate 1.17 times less return on investment than BMO MSCI. In addition to that, Vanguard Total is 1.1 times more volatile than BMO MSCI USA. It trades about 0.22 of its total potential returns per unit of risk. BMO MSCI USA is currently generating about 0.29 per unit of volatility. If you would invest 8,861 in BMO MSCI USA on November 3, 2024 and sell it today you would earn a total of 433.00 from holding BMO MSCI USA or generate 4.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Total Market vs. BMO MSCI USA
Performance |
| Timeline |
| Vanguard Total Market |
| BMO MSCI USA |
Vanguard Total and BMO MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and BMO MSCI
The main advantage of trading using opposite Vanguard Total and BMO MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total 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 Total vs. Vanguard FTSE Canada | Vanguard Total vs. Vanguard FTSE Emerging | Vanguard Total vs. iShares Core MSCI | Vanguard Total vs. Vanguard Canadian Aggregate |
| 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum |