Correlation Between BMO Aggregate and Caribbean Utilities
Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and Caribbean Utilities 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 Caribbean Utilities 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 Caribbean Utilities, you can compare the effects of market volatilities on BMO Aggregate and Caribbean Utilities 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 Caribbean Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and Caribbean Utilities.
Diversification Opportunities for BMO Aggregate and Caribbean Utilities
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BMO and Caribbean is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Caribbean Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caribbean Utilities 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 Caribbean Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caribbean Utilities has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Caribbean Utilities go up and down completely randomly.
Pair Corralation between BMO Aggregate and Caribbean Utilities
Assuming the 90 days trading horizon BMO Aggregate Bond is expected to under-perform the Caribbean Utilities. But the etf apears to be less risky and, when comparing its historical volatility, BMO Aggregate Bond is 6.57 times less risky than Caribbean Utilities. The etf trades about -0.11 of its potential returns per unit of risk. The Caribbean Utilities is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 1,391 in Caribbean Utilities on August 27, 2024 and sell it today you would lose (3.00) from holding Caribbean Utilities or give up 0.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Aggregate Bond vs. Caribbean Utilities
Performance |
| Timeline |
| BMO Aggregate Bond |
| Caribbean Utilities |
BMO Aggregate and Caribbean Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Aggregate and Caribbean Utilities
The main advantage of trading using opposite BMO Aggregate and Caribbean Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, Caribbean Utilities 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 Caribbean Utilities will offset losses from the drop in Caribbean Utilities' 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 |
| Caribbean Utilities vs. Maxim Power Corp | Caribbean Utilities vs. ATCO | Caribbean Utilities vs. Capstone Infrastructure Corp | Caribbean Utilities vs. Richards Packaging Income |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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