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 Mid Cap, 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
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between BMO and Dynamic is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Dynamic Active Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynamic Active Mid 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 Mid 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 is expected to generate 6.26 times less return on investment than Dynamic Active. But when comparing it to its historical volatility, BMO Aggregate Bond is 2.76 times less risky than Dynamic Active. It trades about 0.07 of its potential returns per unit of risk. Dynamic Active Mid Cap is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,218 in Dynamic Active Mid Cap on September 1, 2024 and sell it today you would earn a total of 236.00 from holding Dynamic Active Mid Cap or generate 19.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Aggregate Bond vs. Dynamic Active Mid Cap
Performance |
| Timeline |
| BMO Aggregate Bond |
| Dynamic Active Mid |
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. iShares SPTSX Small | Dynamic Active vs. iShares Canadian Value | Dynamic Active vs. iShares Canadian Growth | Dynamic Active vs. iShares SPTSX Completion |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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