Correlation Between BMO Growth and Vanguard Growth
Can any of the company-specific risk be diversified away by investing in both BMO Growth and Vanguard Growth 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 Growth and Vanguard Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Growth ETF and Vanguard Growth Portfolio, you can compare the effects of market volatilities on BMO Growth and Vanguard Growth 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 Growth with a short position of Vanguard Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Growth and Vanguard Growth.
Diversification Opportunities for BMO Growth and Vanguard Growth
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between BMO and Vanguard is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding BMO Growth ETF and Vanguard Growth Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Growth Portfolio and BMO Growth 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 Growth ETF are associated (or correlated) with Vanguard Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Growth Portfolio has no effect on the direction of BMO Growth i.e., BMO Growth and Vanguard Growth go up and down completely randomly.
Pair Corralation between BMO Growth and Vanguard Growth
Assuming the 90 days trading horizon BMO Growth is expected to generate 1.0 times less return on investment than Vanguard Growth. But when comparing it to its historical volatility, BMO Growth ETF is 1.01 times less risky than Vanguard Growth. It trades about 0.14 of its potential returns per unit of risk. Vanguard Growth Portfolio is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 2,898 in Vanguard Growth Portfolio on August 29, 2024 and sell it today you would earn a total of 889.00 from holding Vanguard Growth Portfolio or generate 30.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Growth ETF vs. Vanguard Growth Portfolio
Performance |
| Timeline |
| BMO Growth ETF |
| Vanguard Growth Portfolio |
BMO Growth and Vanguard Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Growth and Vanguard Growth
The main advantage of trading using opposite BMO Growth and Vanguard Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Growth position performs unexpectedly, Vanguard Growth 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 Growth will offset losses from the drop in Vanguard Growth's long position.| BMO Growth vs. IA Clarington Core | BMO Growth vs. IA Clarington Floating | BMO Growth vs. IA Clarington Strategic | BMO Growth vs. Purpose Global Bond |
| Vanguard Growth vs. IA Clarington Core | Vanguard Growth vs. IA Clarington Floating | Vanguard Growth vs. IA Clarington Strategic | Vanguard Growth vs. Purpose Global Bond |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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