Correlation Between Sun Life and BMO Aggregate
Can any of the company-specific risk be diversified away by investing in both Sun Life 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 Sun Life and BMO Aggregate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sun Life Financial and BMO Aggregate Bond, you can compare the effects of market volatilities on Sun Life 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 Sun Life with a short position of BMO Aggregate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Life and BMO Aggregate.
Diversification Opportunities for Sun Life and BMO Aggregate
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sun and BMO is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial 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 Sun Life 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 Sun Life Financial 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 Sun Life i.e., Sun Life and BMO Aggregate go up and down completely randomly.
Pair Corralation between Sun Life and BMO Aggregate
Assuming the 90 days trading horizon Sun Life Financial is expected to under-perform the BMO Aggregate. In addition to that, Sun Life is 3.55 times more volatile than BMO Aggregate Bond. It trades about -0.06 of its total potential returns per unit of risk. BMO Aggregate Bond is currently generating about 0.09 per unit of volatility. If you would invest 3,014 in BMO Aggregate Bond on August 30, 2024 and sell it today you would earn a total of 15.00 from holding BMO Aggregate Bond or generate 0.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Sun Life Financial vs. BMO Aggregate Bond
Performance |
| Timeline |
| Sun Life Financial |
| BMO Aggregate Bond |
Sun Life and BMO Aggregate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sun Life and BMO Aggregate
The main advantage of trading using opposite Sun Life and BMO Aggregate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Life 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.| Sun Life vs. Sun Life Non | Sun Life vs. Sun Life Financial | Sun Life vs. Forstrong Global Income | Sun Life vs. BMO Aggregate Bond |
| BMO Aggregate vs. iShares SPTSX 60 | BMO Aggregate vs. iShares Core SP | BMO Aggregate vs. iShares Core SPTSX | BMO Aggregate vs. BMO Aggregate Bond |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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