Correlation Between BMO Aggregate and BMO Mid
Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and BMO Mid 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 BMO Mid 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 BMO Mid Federal, you can compare the effects of market volatilities on BMO Aggregate and BMO Mid 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 BMO Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and BMO Mid.
Diversification Opportunities for BMO Aggregate and BMO Mid
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BMO and BMO is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and BMO Mid Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Mid Federal 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 BMO Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Mid Federal has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and BMO Mid go up and down completely randomly.
Pair Corralation between BMO Aggregate and BMO Mid
Assuming the 90 days trading horizon BMO Aggregate Bond is expected to generate 1.0 times more return on investment than BMO Mid. However, BMO Aggregate Bond is 1.0 times less risky than BMO Mid. It trades about 0.08 of its potential returns per unit of risk. BMO Mid Federal is currently generating about 0.0 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 | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Aggregate Bond vs. BMO Mid Federal
Performance |
| Timeline |
| BMO Aggregate Bond |
| BMO Mid Federal |
BMO Aggregate and BMO Mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Aggregate and BMO Mid
The main advantage of trading using opposite BMO Aggregate and BMO Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, BMO Mid 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 BMO Mid will offset losses from the drop in BMO Mid'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 |
| BMO Mid vs. BMO Aggregate Bond | BMO Mid vs. iShares Canadian Universe | BMO Mid vs. BMO Core Plus | BMO Mid vs. BMO Discount Bond |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
Other Complementary Tools
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing |