Correlation Between Manulife Multifactor and BMO Aggregate
Can any of the company-specific risk be diversified away by investing in both Manulife Multifactor 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 Manulife Multifactor and BMO Aggregate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Manulife Multifactor Canadian and BMO Aggregate Bond, you can compare the effects of market volatilities on Manulife Multifactor 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 Manulife Multifactor with a short position of BMO Aggregate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Manulife Multifactor and BMO Aggregate.
Diversification Opportunities for Manulife Multifactor and BMO Aggregate
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Manulife and BMO is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Multifactor Canadian 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 Manulife Multifactor 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 Manulife Multifactor Canadian 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 Manulife Multifactor i.e., Manulife Multifactor and BMO Aggregate go up and down completely randomly.
Pair Corralation between Manulife Multifactor and BMO Aggregate
Assuming the 90 days trading horizon Manulife Multifactor Canadian is expected to generate 3.03 times more return on investment than BMO Aggregate. However, Manulife Multifactor is 3.03 times more volatile than BMO Aggregate Bond. It trades about 0.08 of its potential returns per unit of risk. BMO Aggregate Bond is currently generating about 0.07 per unit of risk. If you would invest 3,908 in Manulife Multifactor Canadian on September 1, 2024 and sell it today you would earn a total of 391.00 from holding Manulife Multifactor Canadian or generate 10.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Manulife Multifactor Canadian vs. BMO Aggregate Bond
Performance |
| Timeline |
| Manulife Multifactor |
| BMO Aggregate Bond |
Manulife Multifactor and BMO Aggregate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Manulife Multifactor and BMO Aggregate
The main advantage of trading using opposite Manulife Multifactor and BMO Aggregate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Manulife Multifactor 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 Manulife Multifactor Canadian 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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