Correlation Between BMO Core and BMO Mid
Can any of the company-specific risk be diversified away by investing in both BMO Core 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 Core 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 Core Plus and BMO Mid Term IG, you can compare the effects of market volatilities on BMO Core 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 Core with a short position of BMO Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Core and BMO Mid.
Diversification Opportunities for BMO Core and BMO Mid
Very weak diversification
The 3 months correlation between BMO and BMO is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding BMO Core Plus and BMO Mid Term IG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Mid Term 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 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 Term has no effect on the direction of BMO Core i.e., BMO Core and BMO Mid go up and down completely randomly.
Pair Corralation between BMO Core and BMO Mid
Assuming the 90 days trading horizon BMO Core Plus is expected to generate 1.34 times more return on investment than BMO Mid. However, BMO Core is 1.34 times more volatile than BMO Mid Term IG. It trades about 0.08 of its potential returns per unit of risk. BMO Mid Term IG is currently generating about -0.02 per unit of risk. If you would invest 2,787 in BMO Core Plus on August 29, 2024 and sell it today you would earn a total of 23.00 from holding BMO Core Plus or generate 0.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Core Plus vs. BMO Mid Term IG
Performance |
| Timeline |
| BMO Core Plus |
| BMO Mid Term |
BMO Core and BMO Mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Core and BMO Mid
The main advantage of trading using opposite BMO Core and BMO Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Core 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 Core vs. Mackenzie Core Plus | BMO Core vs. Mackenzie Unconstrained Bond | BMO Core vs. Mackenzie Floating Rate | BMO Core vs. Mackenzie Canadian Short |
| BMO Mid vs. Mackenzie High Yield | BMO Mid vs. Mackenzie Core Plus | BMO Mid vs. Mackenzie Canadian Aggregate | BMO Mid vs. Mackenzie Core Plus |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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