Correlation Between BMO Long and Vanguard Canadian
Can any of the company-specific risk be diversified away by investing in both BMO Long 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 Long 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 Long Provincial and Vanguard Canadian Long Term, you can compare the effects of market volatilities on BMO Long 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 Long with a short position of Vanguard Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Long and Vanguard Canadian.
Diversification Opportunities for BMO Long and Vanguard Canadian
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between BMO and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding BMO Long Provincial and Vanguard Canadian Long Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Canadian Long and BMO Long 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 Long Provincial 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 Long has no effect on the direction of BMO Long i.e., BMO Long and Vanguard Canadian go up and down completely randomly.
Pair Corralation between BMO Long and Vanguard Canadian
Assuming the 90 days trading horizon BMO Long Provincial is expected to generate 1.1 times more return on investment than Vanguard Canadian. However, BMO Long is 1.1 times more volatile than Vanguard Canadian Long Term. It trades about -0.09 of its potential returns per unit of risk. Vanguard Canadian Long Term is currently generating about -0.11 per unit of risk. If you would invest 1,274 in BMO Long Provincial on August 25, 2024 and sell it today you would lose (37.00) from holding BMO Long Provincial or give up 2.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Long Provincial vs. Vanguard Canadian Long Term
Performance |
| Timeline |
| BMO Long Provincial |
| Vanguard Canadian Long |
BMO Long and Vanguard Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Long and Vanguard Canadian
The main advantage of trading using opposite BMO Long and Vanguard Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Long 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 Long vs. BMO Long Corporate | BMO Long vs. BMO Short Provincial | BMO Long vs. BMO Mid Provincial | BMO Long vs. BMO Mid Corporate |
| Vanguard Canadian vs. Vanguard Canadian Government | Vanguard Canadian vs. Vanguard Canadian Corporate | 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
Other Complementary Tools
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets |