Correlation Between BMO SP and PIMCO Monthly
Can any of the company-specific risk be diversified away by investing in both BMO SP and PIMCO Monthly 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 SP and PIMCO Monthly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO SP 500 and PIMCO Monthly Income, you can compare the effects of market volatilities on BMO SP and PIMCO Monthly 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 SP with a short position of PIMCO Monthly. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO SP and PIMCO Monthly.
Diversification Opportunities for BMO SP and PIMCO Monthly
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BMO and PIMCO is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding BMO SP 500 and PIMCO Monthly Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Monthly Income and BMO SP 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 SP 500 are associated (or correlated) with PIMCO Monthly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Monthly Income has no effect on the direction of BMO SP i.e., BMO SP and PIMCO Monthly go up and down completely randomly.
Pair Corralation between BMO SP and PIMCO Monthly
Assuming the 90 days trading horizon BMO SP 500 is expected to generate 3.14 times more return on investment than PIMCO Monthly. However, BMO SP is 3.14 times more volatile than PIMCO Monthly Income. It trades about 0.15 of its potential returns per unit of risk. PIMCO Monthly Income is currently generating about 0.12 per unit of risk. If you would invest 7,679 in BMO SP 500 on September 3, 2024 and sell it today you would earn a total of 1,573 from holding BMO SP 500 or generate 20.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO SP 500 vs. PIMCO Monthly Income
Performance |
| Timeline |
| BMO SP 500 |
| PIMCO Monthly Income |
BMO SP and PIMCO Monthly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO SP and PIMCO Monthly
The main advantage of trading using opposite BMO SP and PIMCO Monthly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO SP position performs unexpectedly, PIMCO Monthly 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 PIMCO Monthly will offset losses from the drop in PIMCO Monthly's long position.| BMO SP vs. BMO SPTSX Capped | BMO SP vs. BMO NASDAQ 100 | BMO SP vs. iShares Core SP | BMO SP vs. Vanguard SP 500 |
| PIMCO Monthly vs. Mackenzie Unconstrained Bond | PIMCO Monthly vs. Global X Active | PIMCO Monthly vs. Mackenzie Floating Rate | PIMCO Monthly vs. PIMCO Investment Grade |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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