Correlation Between BMO Aggregate and Vanguard Total
Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and Vanguard Total 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 Total 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 Total Market, you can compare the effects of market volatilities on BMO Aggregate and Vanguard Total 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 Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and Vanguard Total.
Diversification Opportunities for BMO Aggregate and Vanguard Total
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between BMO and Vanguard is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Vanguard Total Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Market 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 Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Market has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Vanguard Total go up and down completely randomly.
Pair Corralation between BMO Aggregate and Vanguard Total
Assuming the 90 days trading horizon BMO Aggregate is expected to generate 10.41 times less return on investment than Vanguard Total. But when comparing it to its historical volatility, BMO Aggregate Bond is 3.42 times less risky than Vanguard Total. It trades about 0.13 of its potential returns per unit of risk. Vanguard Total Market is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest 10,719 in Vanguard Total Market on September 6, 2024 and sell it today you would earn a total of 840.00 from holding Vanguard Total Market or generate 7.84% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 95.65% |
Values | Daily Returns |
BMO Aggregate Bond vs. Vanguard Total Market
Performance |
Timeline |
BMO Aggregate Bond |
Vanguard Total Market |
BMO Aggregate and Vanguard Total Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BMO Aggregate and Vanguard Total
The main advantage of trading using opposite BMO Aggregate and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, Vanguard Total 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 Total will offset losses from the drop in Vanguard Total's long position.BMO Aggregate vs. BMO Short Term Bond | BMO Aggregate vs. BMO Canadian Bank | BMO Aggregate vs. BMO Aggregate Bond | BMO Aggregate vs. BMO Balanced ETF |
Vanguard Total vs. Franklin Bissett Corporate | Vanguard Total vs. FT AlphaDEX Industrials | Vanguard Total vs. BMO Aggregate Bond | Vanguard Total vs. iShares Canadian HYBrid |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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