Correlation Between Franklin Large and BMO Aggregate
Can any of the company-specific risk be diversified away by investing in both Franklin Large 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 Large 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 Large Cap and BMO Aggregate Bond, you can compare the effects of market volatilities on Franklin Large 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 Large with a short position of BMO Aggregate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Large and BMO Aggregate.
Diversification Opportunities for Franklin Large and BMO Aggregate
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Franklin and BMO is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Large Cap 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 Large 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 Large Cap 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 Large i.e., Franklin Large and BMO Aggregate go up and down completely randomly.
Pair Corralation between Franklin Large and BMO Aggregate
Assuming the 90 days trading horizon Franklin Large Cap is expected to generate 4.87 times more return on investment than BMO Aggregate. However, Franklin Large is 4.87 times more volatile than BMO Aggregate Bond. It trades about 0.17 of its potential returns per unit of risk. BMO Aggregate Bond is currently generating about -0.21 per unit of risk. If you would invest 4,689 in Franklin Large Cap on August 25, 2024 and sell it today you would earn a total of 152.00 from holding Franklin Large Cap or generate 3.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Large Cap vs. BMO Aggregate Bond
Performance |
| Timeline |
| Franklin Large Cap |
| BMO Aggregate Bond |
Franklin Large and BMO Aggregate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Large and BMO Aggregate
The main advantage of trading using opposite Franklin Large and BMO Aggregate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Large 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.| Franklin Large vs. Franklin Bissett Corporate | Franklin Large vs. FT AlphaDEX Industrials | Franklin Large vs. Dynamic Active Dividend |
| 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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