Correlation Between Vanguard Balanced and BMO Conservative

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Can any of the company-specific risk be diversified away by investing in both Vanguard Balanced 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 Balanced 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 Balanced Portfolio and BMO Conservative ETF, you can compare the effects of market volatilities on Vanguard Balanced 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 Balanced with a short position of BMO Conservative. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Balanced and BMO Conservative.

Diversification Opportunities for Vanguard Balanced and BMO Conservative

0.99
  Correlation Coefficient

No risk reduction

The 3 months correlation between Vanguard and BMO is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Balanced Portfolio 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 Balanced 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 Balanced Portfolio 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 Balanced i.e., Vanguard Balanced and BMO Conservative go up and down completely randomly.

Pair Corralation between Vanguard Balanced and BMO Conservative

Assuming the 90 days trading horizon Vanguard Balanced Portfolio is expected to generate 1.1 times more return on investment than BMO Conservative. However, Vanguard Balanced is 1.1 times more volatile than BMO Conservative ETF. It trades about 0.36 of its potential returns per unit of risk. BMO Conservative ETF is currently generating about 0.28 per unit of risk. If you would invest  3,134  in Vanguard Balanced Portfolio on April 20, 2025 and sell it today you would earn a total of  314.00  from holding Vanguard Balanced Portfolio or generate 10.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Vanguard Balanced Portfolio  vs.  BMO Conservative ETF

 Performance 
       Timeline  
Vanguard Balanced 

Risk-Adjusted Performance

Strong

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Balanced Portfolio are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vanguard Balanced may actually be approaching a critical reversion point that can send shares even higher in August 2025.
BMO Conservative ETF 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in BMO Conservative ETF are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO Conservative may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Vanguard Balanced and BMO Conservative Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vanguard Balanced and BMO Conservative

The main advantage of trading using opposite Vanguard Balanced and BMO Conservative positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Balanced 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 Balanced Portfolio 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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