Correlation Between BMO Aggregate and TD Long
Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and TD Long 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 TD Long 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 TD Long Term, you can compare the effects of market volatilities on BMO Aggregate and TD Long 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 TD Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and TD Long.
Diversification Opportunities for BMO Aggregate and TD Long
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BMO and TULB is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and TD Long Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Long Term 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 TD Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Long Term has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and TD Long go up and down completely randomly.
Pair Corralation between BMO Aggregate and TD Long
Assuming the 90 days trading horizon BMO Aggregate Bond is expected to generate 0.27 times more return on investment than TD Long. However, BMO Aggregate Bond is 3.67 times less risky than TD Long. It trades about 0.05 of its potential returns per unit of risk. TD Long Term is currently generating about 0.01 per unit of risk. If you would invest 1,284 in BMO Aggregate Bond on September 1, 2024 and sell it today you would earn a total of 121.00 from holding BMO Aggregate Bond or generate 9.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.82% |
| Values | Daily Returns |
BMO Aggregate Bond vs. TD Long Term
Performance |
| Timeline |
| BMO Aggregate Bond |
| TD Long Term |
BMO Aggregate and TD Long Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Aggregate and TD Long
The main advantage of trading using opposite BMO Aggregate and TD Long positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, TD Long 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 TD Long will offset losses from the drop in TD Long'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 |
| TD Long vs. TD Canadian Long | TD Long vs. TD Active Global | TD Long vs. TD Active High | TD Long vs. TD Active Global |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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