Correlation Between Franklin Global and BMO Aggregate
Can any of the company-specific risk be diversified away by investing in both Franklin Global and BMO Aggregate 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 Franklin Global and BMO Aggregate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Global Aggregate and BMO Aggregate Bond, you can compare the effects of market volatilities on Franklin Global and BMO Aggregate 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 Franklin Global with a short position of BMO Aggregate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Global and BMO Aggregate.
Diversification Opportunities for Franklin Global and BMO Aggregate
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Franklin and BMO is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Global Aggregate and BMO Aggregate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Aggregate Bond and Franklin Global 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 Franklin Global Aggregate are associated (or correlated) with BMO Aggregate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Aggregate Bond has no effect on the direction of Franklin Global i.e., Franklin Global and BMO Aggregate go up and down completely randomly.
Pair Corralation between Franklin Global and BMO Aggregate
Assuming the 90 days trading horizon Franklin Global Aggregate is expected to generate 1.01 times more return on investment than BMO Aggregate. However, Franklin Global is 1.01 times more volatile than BMO Aggregate Bond. It trades about 0.04 of its potential returns per unit of risk. BMO Aggregate Bond is currently generating about 0.01 per unit of risk. If you would invest 1,791 in Franklin Global Aggregate on August 29, 2024 and sell it today you would earn a total of 117.00 from holding Franklin Global Aggregate or generate 6.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 94.13% |
| Values | Daily Returns |
Franklin Global Aggregate vs. BMO Aggregate Bond
Performance |
| Timeline |
| Franklin Global Aggregate |
| BMO Aggregate Bond |
Franklin Global and BMO Aggregate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Global and BMO Aggregate
The main advantage of trading using opposite Franklin Global and BMO Aggregate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Global position performs unexpectedly, BMO Aggregate 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 Aggregate will offset losses from the drop in BMO Aggregate's long position.The idea behind Franklin Global Aggregate and BMO Aggregate Bond 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.| 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 |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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