Correlation Between BMO Aggregate and CIBC Conservative
Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and CIBC Conservative 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 CIBC Conservative 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 CIBC Conservative Fixed, you can compare the effects of market volatilities on BMO Aggregate and CIBC Conservative 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 CIBC Conservative. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and CIBC Conservative.
Diversification Opportunities for BMO Aggregate and CIBC Conservative
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BMO and CIBC is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and CIBC Conservative Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIBC Conservative Fixed 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 CIBC Conservative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIBC Conservative Fixed has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and CIBC Conservative go up and down completely randomly.
Pair Corralation between BMO Aggregate and CIBC Conservative
Assuming the 90 days trading horizon BMO Aggregate Bond is expected to under-perform the CIBC Conservative. In addition to that, BMO Aggregate is 2.15 times more volatile than CIBC Conservative Fixed. It trades about -0.26 of its total potential returns per unit of risk. CIBC Conservative Fixed is currently generating about 0.0 per unit of volatility. If you would invest 1,829 in CIBC Conservative Fixed on October 7, 2024 and sell it today you would earn a total of 0.00 from holding CIBC Conservative Fixed or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Aggregate Bond vs. CIBC Conservative Fixed
Performance |
| Timeline |
| BMO Aggregate Bond |
| CIBC Conservative Fixed |
BMO Aggregate and CIBC Conservative Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Aggregate and CIBC Conservative
The main advantage of trading using opposite BMO Aggregate and CIBC Conservative positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, CIBC Conservative 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 CIBC Conservative will offset losses from the drop in CIBC Conservative'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 |
| CIBC Conservative vs. CIBC Core Fixed | CIBC Conservative vs. CIBC Canadian Equity | CIBC Conservative vs. CIBC Clean Energy | CIBC Conservative vs. CIBC Qx Low |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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