Correlation Between BMO Core and Vanguard Canadian
Can any of the company-specific risk be diversified away by investing in both BMO Core 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 Core 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 Core Plus and Vanguard Canadian Government, you can compare the effects of market volatilities on BMO Core 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 Core with a short position of Vanguard Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Core and Vanguard Canadian.
Diversification Opportunities for BMO Core and Vanguard Canadian
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BMO and Vanguard is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding BMO Core Plus 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 Core 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 Core Plus 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 Core i.e., BMO Core and Vanguard Canadian go up and down completely randomly.
Pair Corralation between BMO Core and Vanguard Canadian
Assuming the 90 days trading horizon BMO Core Plus is expected to generate 0.96 times more return on investment than Vanguard Canadian. However, BMO Core Plus is 1.05 times less risky than Vanguard Canadian. It trades about 0.03 of its potential returns per unit of risk. Vanguard Canadian Government is currently generating about 0.02 per unit of risk. If you would invest 2,586 in BMO Core Plus on August 26, 2024 and sell it today you would earn a total of 192.00 from holding BMO Core Plus or generate 7.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Core Plus vs. Vanguard Canadian Government
Performance |
| Timeline |
| BMO Core Plus |
| Vanguard Canadian |
BMO Core and Vanguard Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Core and Vanguard Canadian
The main advantage of trading using opposite BMO Core and Vanguard Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Core 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 Core vs. BMO Mid Term IG | BMO Core vs. BMO Sustainable Global | BMO Core vs. BMO Government Bond | BMO Core vs. BMO Mid Corporate |
| Vanguard Canadian vs. Mackenzie Core Plus | Vanguard Canadian vs. Mackenzie Unconstrained Bond | Vanguard Canadian vs. Mackenzie Floating Rate | Vanguard Canadian vs. Mackenzie Canadian Aggregate |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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