Correlation Between BMO Mid and Vident Core
Can any of the company-specific risk be diversified away by investing in both BMO Mid and Vident Core 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 Mid and Vident Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Mid Federal and Vident Core Bond, you can compare the effects of market volatilities on BMO Mid and Vident Core 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 Mid with a short position of Vident Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Mid and Vident Core.
Diversification Opportunities for BMO Mid and Vident Core
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BMO and Vident is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding BMO Mid Federal and Vident Core Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vident Core Bond and BMO Mid 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 Mid Federal are associated (or correlated) with Vident Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vident Core Bond has no effect on the direction of BMO Mid i.e., BMO Mid and Vident Core go up and down completely randomly.
Pair Corralation between BMO Mid and Vident Core
Assuming the 90 days trading horizon BMO Mid is expected to generate 1.6 times less return on investment than Vident Core. In addition to that, BMO Mid is 1.27 times more volatile than Vident Core Bond. It trades about 0.02 of its total potential returns per unit of risk. Vident Core Bond is currently generating about 0.05 per unit of volatility. If you would invest 4,034 in Vident Core Bond on September 3, 2024 and sell it today you would earn a total of 364.00 from holding Vident Core Bond or generate 9.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Mid Federal vs. Vident Core Bond
Performance |
| Timeline |
| BMO Mid Federal |
| Vident Core Bond |
BMO Mid and Vident Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Mid and Vident Core
The main advantage of trading using opposite BMO Mid and Vident Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Mid position performs unexpectedly, Vident Core 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 Vident Core will offset losses from the drop in Vident Core's long position.| BMO Mid vs. BMO Short Corporate | BMO Mid vs. BMO High Yield | BMO Mid vs. iShares Core Canadian | BMO Mid vs. Harvest Global REIT |
| Vident Core vs. Vident Core Equity | Vident Core vs. Vident International Equity | Vident Core vs. Invesco Variable Rate | Vident Core vs. FlexShares Credit Scored Corporate |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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