Correlation Between BMO Short and PIMCO Investment
Can any of the company-specific risk be diversified away by investing in both BMO Short and PIMCO Investment 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 PIMCO Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Short Term IG and PIMCO Investment Grade, you can compare the effects of market volatilities on BMO Short and PIMCO Investment 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 PIMCO Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Short and PIMCO Investment.
Diversification Opportunities for BMO Short and PIMCO Investment
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BMO and PIMCO is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding BMO Short Term IG and PIMCO Investment Grade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Investment Grade 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 IG are associated (or correlated) with PIMCO Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Investment Grade has no effect on the direction of BMO Short i.e., BMO Short and PIMCO Investment go up and down completely randomly.
Pair Corralation between BMO Short and PIMCO Investment
Assuming the 90 days trading horizon BMO Short is expected to generate 1.83 times less return on investment than PIMCO Investment. But when comparing it to its historical volatility, BMO Short Term IG is 3.02 times less risky than PIMCO Investment. It trades about 0.09 of its potential returns per unit of risk. PIMCO Investment Grade is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,646 in PIMCO Investment Grade on September 1, 2024 and sell it today you would earn a total of 13.00 from holding PIMCO Investment Grade or generate 0.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Short Term IG vs. PIMCO Investment Grade
Performance |
| Timeline |
| BMO Short Term |
| PIMCO Investment Grade |
BMO Short and PIMCO Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Short and PIMCO Investment
The main advantage of trading using opposite BMO Short and PIMCO Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Short position performs unexpectedly, PIMCO Investment 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 Investment will offset losses from the drop in PIMCO Investment's long position.| BMO Short vs. BMO Mid Term IG | BMO Short vs. BMO Short Provincial | BMO Short vs. BMO Short Federal | BMO Short vs. BMO Floating Rate |
| PIMCO Investment vs. BMO Mid Corporate | PIMCO Investment vs. CI Canadian Banks | PIMCO Investment vs. BMO Long Corporate | PIMCO Investment vs. Hamilton MidSmall Cap Financials |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
Other Complementary Tools
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas |