Correlation Between BMO Aggregate and Mackenzie TIPS
Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and Mackenzie TIPS 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 Mackenzie TIPS 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 Mackenzie TIPS Index, you can compare the effects of market volatilities on BMO Aggregate and Mackenzie TIPS 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 Mackenzie TIPS. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and Mackenzie TIPS.
Diversification Opportunities for BMO Aggregate and Mackenzie TIPS
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BMO and Mackenzie is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Mackenzie TIPS Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mackenzie TIPS Index 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 Mackenzie TIPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mackenzie TIPS Index has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Mackenzie TIPS go up and down completely randomly.
Pair Corralation between BMO Aggregate and Mackenzie TIPS
Assuming the 90 days trading horizon BMO Aggregate Bond is expected to generate 1.4 times more return on investment than Mackenzie TIPS. However, BMO Aggregate is 1.4 times more volatile than Mackenzie TIPS Index. It trades about 0.08 of its potential returns per unit of risk. Mackenzie TIPS Index is currently generating about -0.04 per unit of risk. If you would invest 1,379 in BMO Aggregate Bond on August 29, 2024 and sell it today you would earn a total of 9.00 from holding BMO Aggregate Bond or generate 0.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Aggregate Bond vs. Mackenzie TIPS Index
Performance |
| Timeline |
| BMO Aggregate Bond |
| Mackenzie TIPS Index |
BMO Aggregate and Mackenzie TIPS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Aggregate and Mackenzie TIPS
The main advantage of trading using opposite BMO Aggregate and Mackenzie TIPS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, Mackenzie TIPS 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 Mackenzie TIPS will offset losses from the drop in Mackenzie TIPS'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 |
| Mackenzie TIPS vs. Mackenzie Developed ex North | Mackenzie TIPS vs. Mackenzie Global Sustainable | Mackenzie TIPS vs. Mackenzie Aggregate Bond | Mackenzie TIPS vs. Mackenzie Canadian Ultra |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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