Correlation Between Vanguard Retirement and BMO Conservative

Can any of the company-specific risk be diversified away by investing in both Vanguard Retirement and BMO Conservative 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 Vanguard Retirement and BMO Conservative into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Retirement Income and BMO Conservative ETF, you can compare the effects of market volatilities on Vanguard Retirement and BMO Conservative 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 Vanguard Retirement with a short position of BMO Conservative. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Retirement and BMO Conservative.

Diversification Opportunities for Vanguard Retirement and BMO Conservative

0.85

Correlation Coefficient

Vanguard Retirement  BMO Conservative

Very poor diversification

The 3 months correlation between Vanguard and BMO is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Retirement Income and BMO Conservative ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Conservative ETF and Vanguard Retirement 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 Vanguard Retirement Income are associated (or correlated) with BMO Conservative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Conservative ETF has no effect on the direction of Vanguard Retirement i.e., Vanguard Retirement and BMO Conservative go up and down completely randomly.

Pair Corralation between Vanguard Retirement and BMO Conservative

Assuming the 90 days trading horizon Vanguard Retirement is expected to generate 1.07 times less return on investment than BMO Conservative. But when comparing it to its historical volatility, Vanguard Retirement Income is 1.52 times less risky than BMO Conservative. It trades about 0.21 of its potential returns per unit of risk. BMO Conservative ETF is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,451  in BMO Conservative ETF on September 3, 2024 and sell it today you would earn a total of  123.00  from holding BMO Conservative ETF or generate 3.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Vanguard Retirement Income  vs.  BMO Conservative ETF

Vanguard Retirement

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Retirement Income are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vanguard Retirement is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

BMO Conservative ETF

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Conservative ETF are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, BMO Conservative is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Retirement and BMO Conservative

The main advantage of trading using opposite Vanguard Retirement and BMO Conservative positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Retirement position performs unexpectedly, BMO Conservative 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 BMO Conservative will offset losses from the drop in BMO Conservative's long position.

The idea behind Vanguard Retirement Income and BMO Conservative ETF pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.