Correlation Between Vanguard Balanced and BMO Growth

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

Diversification Opportunities for Vanguard Balanced and BMO Growth

1.0

Correlation Coefficient

Vanguard Balanced  BMO Growth

No risk reduction

The 3 months correlation between Vanguard and BMO is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Balanced Portfolio and BMO Growth ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Growth 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 Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Growth ETF has no effect on the direction of Vanguard Balanced i.e., Vanguard Balanced and BMO Growth go up and down completely randomly.

Pair Corralation between Vanguard Balanced and BMO Growth

Assuming the 90 days trading horizon Vanguard Balanced is expected to generate 1.32 times less return on investment than BMO Growth. But when comparing it to its historical volatility, Vanguard Balanced Portfolio is 1.3 times less risky than BMO Growth. It trades about 0.36 of its potential returns per unit of risk. BMO Growth ETF is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  4,239  in BMO Growth ETF on April 20, 2025 and sell it today you would earn a total of  568.00  from holding BMO Growth ETF or generate 13.4% return on investment over 90 days.

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

Vanguard Balanced Portfolio  vs.  BMO Growth ETF

Vanguard Balanced

Risk-Adjusted Performance

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 Growth ETF

Risk-Adjusted Performance

Strong

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

Pair Trading with Vanguard Balanced and BMO Growth

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

The idea behind Vanguard Balanced Portfolio and BMO Growth 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..