Correlation Between BMO Aggregate and Vanguard Canadian
Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and Vanguard Canadian 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 BMO Aggregate and Vanguard Canadian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Aggregate Bond and Vanguard Canadian Government, you can compare the effects of market volatilities on BMO Aggregate and Vanguard Canadian 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 BMO Aggregate with a short position of Vanguard Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and Vanguard Canadian.
Diversification Opportunities for BMO Aggregate and Vanguard Canadian
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BMO and Vanguard is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Vanguard Canadian Government in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Canadian and BMO Aggregate 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 BMO Aggregate Bond are associated (or correlated) with Vanguard Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Canadian has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Vanguard Canadian go up and down completely randomly.
Pair Corralation between BMO Aggregate and Vanguard Canadian
Assuming the 90 days trading horizon BMO Aggregate is expected to generate 1.0 times less return on investment than Vanguard Canadian. But when comparing it to its historical volatility, BMO Aggregate Bond is 1.15 times less risky than Vanguard Canadian. It trades about 0.12 of its potential returns per unit of risk. Vanguard Canadian Government is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,153 in Vanguard Canadian Government on August 29, 2024 and sell it today you would earn a total of 109.00 from holding Vanguard Canadian Government or generate 5.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Aggregate Bond vs. Vanguard Canadian Government
Performance |
| Timeline |
| BMO Aggregate Bond |
| Vanguard Canadian |
BMO Aggregate and Vanguard Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Aggregate and Vanguard Canadian
The main advantage of trading using opposite BMO Aggregate and Vanguard Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, Vanguard Canadian 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 Vanguard Canadian will offset losses from the drop in Vanguard Canadian's long position.| BMO Aggregate vs. iShares Core MSCI | BMO Aggregate vs. Vanguard FTSE Canada | BMO Aggregate vs. Vanguard Canadian Aggregate | BMO Aggregate vs. iShares Core MSCI |
| 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 |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
Other Complementary Tools
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume |