Correlation Between BMO Discount and TD Canadian
Can any of the company-specific risk be diversified away by investing in both BMO Discount and TD 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 Discount and TD Canadian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Discount Bond and TD Canadian Aggregate, you can compare the effects of market volatilities on BMO Discount and TD 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 Discount with a short position of TD Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Discount and TD Canadian.
Diversification Opportunities for BMO Discount and TD Canadian
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between BMO and TDB is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding BMO Discount Bond and TD Canadian Aggregate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Canadian Aggregate and BMO Discount 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 Discount Bond are associated (or correlated) with TD Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Canadian Aggregate has no effect on the direction of BMO Discount i.e., BMO Discount and TD Canadian go up and down completely randomly.
Pair Corralation between BMO Discount and TD Canadian
Assuming the 90 days trading horizon BMO Discount Bond is expected to generate about the same return on investment as TD Canadian Aggregate. However, BMO Discount is 1.01 times more volatile than TD Canadian Aggregate. It trades about 0.05 of its potential returns per unit of risk. TD Canadian Aggregate is currently producing about 0.05 per unit of risk. If you would invest 1,211 in TD Canadian Aggregate on September 1, 2024 and sell it today you would earn a total of 112.00 from holding TD Canadian Aggregate or generate 9.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.78% |
| Values | Daily Returns |
BMO Discount Bond vs. TD Canadian Aggregate
Performance |
| Timeline |
| BMO Discount Bond |
| TD Canadian Aggregate |
BMO Discount and TD Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Discount and TD Canadian
The main advantage of trading using opposite BMO Discount and TD Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Discount position performs unexpectedly, TD 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 TD Canadian will offset losses from the drop in TD Canadian's long position.| BMO Discount vs. Vanguard Canadian Short | BMO Discount vs. BMO Aggregate Bond | BMO Discount vs. BMO Short Corporate | BMO Discount vs. CI 1 5 Year |
| TD Canadian vs. BetaPro Gold Bullion | TD Canadian vs. BetaPro SP TSX | TD Canadian vs. BetaPro SPTSX Capped | TD Canadian vs. Global X Active |
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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