Correlation Between BMO Aggregate and Bip Investment
Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and Bip 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 Aggregate and Bip Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Aggregate Bond and Bip Investment Corp, you can compare the effects of market volatilities on BMO Aggregate and Bip 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 Aggregate with a short position of Bip Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and Bip Investment.
Diversification Opportunities for BMO Aggregate and Bip Investment
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between BMO and Bip is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Bip Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bip Investment Corp and BMO Aggregate 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 Aggregate Bond are associated (or correlated) with Bip Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bip Investment Corp has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Bip Investment go up and down completely randomly.
Pair Corralation between BMO Aggregate and Bip Investment
Assuming the 90 days trading horizon BMO Aggregate is expected to generate 3.7 times less return on investment than Bip Investment. But when comparing it to its historical volatility, BMO Aggregate Bond is 1.44 times less risky than Bip Investment. It trades about 0.09 of its potential returns per unit of risk. Bip Investment Corp is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 2,675 in Bip Investment Corp on August 29, 2024 and sell it today you would earn a total of 50.00 from holding Bip Investment Corp or generate 1.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Aggregate Bond vs. Bip Investment Corp
Performance |
| Timeline |
| BMO Aggregate Bond |
| Bip Investment Corp |
BMO Aggregate and Bip Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Aggregate and Bip Investment
The main advantage of trading using opposite BMO Aggregate and Bip Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, Bip 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 Bip Investment will offset losses from the drop in Bip Investment's long position.| BMO Aggregate vs. BMO Short Term Bond | BMO Aggregate vs. BMO Canadian Bank | BMO Aggregate vs. BMO Aggregate Bond | BMO Aggregate vs. BMO Balanced ETF |
| Bip Investment vs. Forstrong Global Income | Bip Investment vs. BMO Aggregate Bond | Bip Investment vs. Terreno Resources Corp | Bip Investment vs. iShares Canadian HYBrid |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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