Correlation Between BMO International and Vanguard Dividend

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

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

Diversification Opportunities for BMO International and Vanguard Dividend

-0.17

Correlation Coefficient

BMO International  Vanguard Dividend

Good diversification

The 3 months correlation between BMO and Vanguard is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding BMO International Dividend and Vanguard Dividend Appreciation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Dividend and BMO International 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 International Dividend are associated (or correlated) with Vanguard Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Dividend has no effect on the direction of BMO International i.e., BMO International and Vanguard Dividend go up and down completely randomly.

Pair Corralation between BMO International and Vanguard Dividend

Assuming the 90 days trading horizon BMO International Dividend is expected to generate 0.96 times more return on investment than Vanguard Dividend. However, BMO International Dividend is 1.04 times less risky than Vanguard Dividend. It trades about 0.22 of its potential returns per unit of risk. Vanguard Dividend Appreciation is currently generating about -0.04 per unit of risk. If you would invest  2,348  in BMO International Dividend on December 29, 2024 and sell it today you would earn a total of  243.00  from holding BMO International Dividend or generate 10.35% return on investment over 90 days.

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

BMO International Dividend  vs.  Vanguard Dividend Appreciation

BMO International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO International Dividend are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, BMO International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Vanguard Dividend

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Dividend Appreciation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Vanguard Dividend is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BMO International and Vanguard Dividend

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

The idea behind BMO International Dividend and Vanguard Dividend Appreciation 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.