Correlation Between BMO Aggregate and Dynamic Active
Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and Dynamic Active 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 Dynamic Active 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 Dynamic Active Global, you can compare the effects of market volatilities on BMO Aggregate and Dynamic Active 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 Dynamic Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and Dynamic Active.
Diversification Opportunities for BMO Aggregate and Dynamic Active
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between BMO and Dynamic is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Dynamic Active Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynamic Active Global 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 Dynamic Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynamic Active Global has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Dynamic Active go up and down completely randomly.
Pair Corralation between BMO Aggregate and Dynamic Active
Assuming the 90 days trading horizon BMO Aggregate Bond is expected to under-perform the Dynamic Active. But the etf apears to be less risky and, when comparing its historical volatility, BMO Aggregate Bond is 4.36 times less risky than Dynamic Active. The etf trades about -0.02 of its potential returns per unit of risk. The Dynamic Active Global is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 6,762 in Dynamic Active Global on November 27, 2024 and sell it today you would lose (32.00) from holding Dynamic Active Global or give up 0.47% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Aggregate Bond vs. Dynamic Active Global
Performance |
| Timeline |
| BMO Aggregate Bond |
| Dynamic Active Global |
BMO Aggregate and Dynamic Active Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Aggregate and Dynamic Active
The main advantage of trading using opposite BMO Aggregate and Dynamic Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, Dynamic Active 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 Dynamic Active will offset losses from the drop in Dynamic Active'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 |
| Dynamic Active vs. Dynamic Active Dividend | Dynamic Active vs. Dynamic Active Canadian | Dynamic Active vs. BMO MSCI All | Dynamic Active vs. Dynamic Active Preferred |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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