Correlation Between BMO Aggregate and CI Yield
Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and CI Yield 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 BMO Aggregate and CI Yield into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Aggregate Bond and CI Yield Enhanced, you can compare the effects of market volatilities on BMO Aggregate and CI Yield 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 BMO Aggregate with a short position of CI Yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and CI Yield.
Diversification Opportunities for BMO Aggregate and CI Yield
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BMO and CAGG is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and CI Yield Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Yield Enhanced and BMO Aggregate 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 BMO Aggregate Bond are associated (or correlated) with CI Yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Yield Enhanced has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and CI Yield go up and down completely randomly.
Pair Corralation between BMO Aggregate and CI Yield
Assuming the 90 days trading horizon BMO Aggregate Bond is expected to generate 1.22 times more return on investment than CI Yield. However, BMO Aggregate is 1.22 times more volatile than CI Yield Enhanced. It trades about 0.17 of its potential returns per unit of risk. CI Yield Enhanced is currently generating about 0.07 per unit of risk. If you would invest 1,383 in BMO Aggregate Bond on September 1, 2024 and sell it today you would earn a total of 22.00 from holding BMO Aggregate Bond or generate 1.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
BMO Aggregate Bond vs. CI Yield Enhanced
Performance |
| Timeline |
| BMO Aggregate Bond |
| CI Yield Enhanced |
BMO Aggregate and CI Yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Aggregate and CI Yield
The main advantage of trading using opposite BMO Aggregate and CI Yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, CI Yield 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 CI Yield will offset losses from the drop in CI Yield's long position.| BMO Aggregate vs. iShares Core MSCI | BMO Aggregate vs. Vanguard FTSE Canada | BMO Aggregate vs. Vanguard Canadian Aggregate | BMO Aggregate vs. iShares Core MSCI |
| CI Yield vs. NBI High Yield | CI Yield vs. NBI Unconstrained Fixed | CI Yield vs. Mackenzie Developed ex North | CI Yield vs. BMO Short Term 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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