Correlation Between Invesco FTSE and BMO Aggregate
Can any of the company-specific risk be diversified away by investing in both Invesco FTSE 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 Invesco FTSE and BMO Aggregate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco FTSE RAFI and BMO Aggregate Bond, you can compare the effects of market volatilities on Invesco FTSE 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 Invesco FTSE with a short position of BMO Aggregate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco FTSE and BMO Aggregate.
Diversification Opportunities for Invesco FTSE and BMO Aggregate
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Invesco and BMO is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Invesco FTSE RAFI 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 Invesco FTSE 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 Invesco FTSE RAFI 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 Invesco FTSE i.e., Invesco FTSE and BMO Aggregate go up and down completely randomly.
Pair Corralation between Invesco FTSE and BMO Aggregate
Assuming the 90 days trading horizon Invesco FTSE RAFI is expected to generate 5.41 times more return on investment than BMO Aggregate. However, Invesco FTSE is 5.41 times more volatile than BMO Aggregate Bond. It trades about 0.2 of its potential returns per unit of risk. BMO Aggregate Bond is currently generating about 0.13 per unit of risk. If you would invest 3,494 in Invesco FTSE RAFI on September 1, 2024 and sell it today you would earn a total of 211.00 from holding Invesco FTSE RAFI or generate 6.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Invesco FTSE RAFI vs. BMO Aggregate Bond
Performance |
| Timeline |
| Invesco FTSE RAFI |
| BMO Aggregate Bond |
Invesco FTSE and BMO Aggregate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco FTSE and BMO Aggregate
The main advantage of trading using opposite Invesco FTSE and BMO Aggregate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco FTSE 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.| Invesco FTSE vs. Invesco FTSE RAFI | Invesco FTSE vs. Invesco 1 3 Year | Invesco FTSE vs. iShares SP Mid Cap |
| 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
Other Complementary Tools
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. |