Correlation Between BMO Core and Guardian Canadian
Can any of the company-specific risk be diversified away by investing in both BMO Core and Guardian Canadian 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 Core and Guardian Canadian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Core Plus and Guardian Canadian Bond, you can compare the effects of market volatilities on BMO Core and Guardian Canadian 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 Core with a short position of Guardian Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Core and Guardian Canadian.
Diversification Opportunities for BMO Core and Guardian Canadian
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BMO and Guardian is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding BMO Core Plus and Guardian Canadian Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian Canadian Bond and BMO Core 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 Core Plus are associated (or correlated) with Guardian Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardian Canadian Bond has no effect on the direction of BMO Core i.e., BMO Core and Guardian Canadian go up and down completely randomly.
Pair Corralation between BMO Core and Guardian Canadian
Assuming the 90 days trading horizon BMO Core Plus is expected to generate 0.98 times more return on investment than Guardian Canadian. However, BMO Core Plus is 1.02 times less risky than Guardian Canadian. It trades about 0.05 of its potential returns per unit of risk. Guardian Canadian Bond is currently generating about 0.04 per unit of risk. If you would invest 2,562 in BMO Core Plus on November 2, 2024 and sell it today you would earn a total of 270.00 from holding BMO Core Plus or generate 10.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Core Plus vs. Guardian Canadian Bond
Performance |
| Timeline |
| BMO Core Plus |
| Guardian Canadian Bond |
BMO Core and Guardian Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Core and Guardian Canadian
The main advantage of trading using opposite BMO Core and Guardian Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Core position performs unexpectedly, Guardian Canadian 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 Guardian Canadian will offset losses from the drop in Guardian Canadian's long position.| BMO Core vs. BMO Mid Term IG | BMO Core vs. BMO Sustainable Global | BMO Core vs. BMO Government Bond | BMO Core vs. BMO Mid Corporate |
| Guardian Canadian vs. Guardian Directed Equity | Guardian Canadian vs. Guardian Canadian Focused | Guardian Canadian vs. Guardian Canadian Sector | Guardian Canadian vs. Guardian Ultra Short Canadian |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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