Correlation Between BMO Mid and BMO Corporate
Can any of the company-specific risk be diversified away by investing in both BMO Mid and BMO Corporate 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 Mid and BMO Corporate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Mid Term IG and BMO Corporate Bond, you can compare the effects of market volatilities on BMO Mid and BMO Corporate 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 Mid with a short position of BMO Corporate. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Mid and BMO Corporate.
Diversification Opportunities for BMO Mid and BMO Corporate
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between BMO and BMO is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding BMO Mid Term IG and BMO Corporate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Corporate Bond and BMO Mid 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 Mid Term IG are associated (or correlated) with BMO Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Corporate Bond has no effect on the direction of BMO Mid i.e., BMO Mid and BMO Corporate go up and down completely randomly.
Pair Corralation between BMO Mid and BMO Corporate
Assuming the 90 days trading horizon BMO Mid is expected to generate 1.11 times less return on investment than BMO Corporate. In addition to that, BMO Mid is 1.25 times more volatile than BMO Corporate Bond. It trades about 0.09 of its total potential returns per unit of risk. BMO Corporate Bond is currently generating about 0.13 per unit of volatility. If you would invest 4,156 in BMO Corporate Bond on August 25, 2024 and sell it today you would earn a total of 530.00 from holding BMO Corporate Bond or generate 12.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Mid Term IG vs. BMO Corporate Bond
Performance |
| Timeline |
| BMO Mid Term |
| BMO Corporate Bond |
BMO Mid and BMO Corporate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Mid and BMO Corporate
The main advantage of trading using opposite BMO Mid and BMO Corporate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Mid position performs unexpectedly, BMO Corporate 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 Corporate will offset losses from the drop in BMO Corporate's long position.| BMO Mid vs. Mackenzie High Yield | BMO Mid vs. Mackenzie Core Plus | BMO Mid vs. Mackenzie Canadian Aggregate | BMO Mid vs. Mackenzie Core Plus |
| BMO Corporate vs. Global Atomic Corp | BMO Corporate vs. enCore Energy Corp | BMO Corporate vs. Fission Uranium Corp | BMO Corporate vs. NexGen Energy |
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.
Other Complementary Tools
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account |