Correlation Between BMO Aggregate and First Trust
Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and First Trust 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 First Trust 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 First Trust NASDAQ, you can compare the effects of market volatilities on BMO Aggregate and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and First Trust.
Diversification Opportunities for BMO Aggregate and First Trust
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BMO and First is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and First Trust NASDAQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust NASDAQ 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust NASDAQ has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and First Trust go up and down completely randomly.
Pair Corralation between BMO Aggregate and First Trust
Assuming the 90 days trading horizon BMO Aggregate is expected to generate 11.99 times less return on investment than First Trust. But when comparing it to its historical volatility, BMO Aggregate Bond is 2.68 times less risky than First Trust. It trades about 0.03 of its potential returns per unit of risk. First Trust NASDAQ is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3,035 in First Trust NASDAQ on August 26, 2024 and sell it today you would earn a total of 2,095 from holding First Trust NASDAQ or generate 69.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.75% |
| Values | Daily Returns |
BMO Aggregate Bond vs. First Trust NASDAQ
Performance |
| Timeline |
| BMO Aggregate Bond |
| First Trust NASDAQ |
BMO Aggregate and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Aggregate and First Trust
The main advantage of trading using opposite BMO Aggregate and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| BMO Aggregate vs. Mackenzie Core Plus | BMO Aggregate vs. Mackenzie Unconstrained Bond | BMO Aggregate vs. Mackenzie Floating Rate | BMO Aggregate vs. Mackenzie Canadian Aggregate |
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.
Other Complementary Tools
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm |