Correlation Between BMO Short and CI Canadian
Can any of the company-specific risk be diversified away by investing in both BMO Short and CI 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 Short and CI Canadian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Short Term Bond and CI Canadian Aggregate, you can compare the effects of market volatilities on BMO Short and CI 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 Short with a short position of CI Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Short and CI Canadian.
Diversification Opportunities for BMO Short and CI Canadian
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BMO and CAGG is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding BMO Short Term Bond and CI Canadian Aggregate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Canadian Aggregate and BMO Short 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 Short Term Bond are associated (or correlated) with CI Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Canadian Aggregate has no effect on the direction of BMO Short i.e., BMO Short and CI Canadian go up and down completely randomly.
Pair Corralation between BMO Short and CI Canadian
Assuming the 90 days trading horizon BMO Short is expected to generate 1.01 times less return on investment than CI Canadian. But when comparing it to its historical volatility, BMO Short Term Bond is 2.25 times less risky than CI Canadian. It trades about 0.12 of its potential returns per unit of risk. CI Canadian Aggregate is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 4,100 in CI Canadian Aggregate on November 27, 2024 and sell it today you would earn a total of 398.00 from holding CI Canadian Aggregate or generate 9.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Short Term Bond vs. CI Canadian Aggregate
Performance |
| Timeline |
| BMO Short Term |
| CI Canadian Aggregate |
BMO Short and CI Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Short and CI Canadian
The main advantage of trading using opposite BMO Short and CI Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Short position performs unexpectedly, CI 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 CI Canadian will offset losses from the drop in CI Canadian's long position.| BMO Short vs. BMO Corporate Bond | BMO Short vs. BMO Government Bond | BMO Short vs. BMO Ultra Short Term | BMO Short vs. BMO Short Term IG |
| CI Canadian vs. NBI High Yield | CI Canadian vs. NBI Unconstrained Fixed | CI Canadian vs. Mackenzie Developed ex North | CI Canadian vs. BMO Short Term 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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