Correlation Between BMO Aggregate and Invesco SP
Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and Invesco SP 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 Invesco SP 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 Invesco SP 500, you can compare the effects of market volatilities on BMO Aggregate and Invesco SP 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 Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and Invesco SP.
Diversification Opportunities for BMO Aggregate and Invesco SP
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BMO and Invesco is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 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 Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP 500 has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Invesco SP go up and down completely randomly.
Pair Corralation between BMO Aggregate and Invesco SP
Assuming the 90 days trading horizon BMO Aggregate is expected to generate 7.23 times less return on investment than Invesco SP. But when comparing it to its historical volatility, BMO Aggregate Bond is 2.43 times less risky than Invesco SP. It trades about 0.06 of its potential returns per unit of risk. Invesco SP 500 is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 4,418 in Invesco SP 500 on November 2, 2024 and sell it today you would earn a total of 147.00 from holding Invesco SP 500 or generate 3.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
BMO Aggregate Bond vs. Invesco SP 500
Performance |
| Timeline |
| BMO Aggregate Bond |
| Invesco SP 500 |
BMO Aggregate and Invesco SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Aggregate and Invesco SP
The main advantage of trading using opposite BMO Aggregate and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, Invesco SP 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 Invesco SP will offset losses from the drop in Invesco SP'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 |
| Invesco SP vs. Invesco SP 500 | Invesco SP vs. BMO MSCI EAFE | Invesco SP vs. BMO MSCI USA | Invesco SP vs. iShares ESG Aware |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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