Correlation Between BMO Aggregate and Brompton European
Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and Brompton European 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 Brompton European 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 Brompton European Dividend, you can compare the effects of market volatilities on BMO Aggregate and Brompton European 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 Brompton European. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and Brompton European.
Diversification Opportunities for BMO Aggregate and Brompton European
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between BMO and Brompton is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Brompton European Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brompton European 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 Brompton European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brompton European has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Brompton European go up and down completely randomly.
Pair Corralation between BMO Aggregate and Brompton European
Assuming the 90 days trading horizon BMO Aggregate Bond is expected to generate 0.11 times more return on investment than Brompton European. However, BMO Aggregate Bond is 9.0 times less risky than Brompton European. It trades about -0.21 of its potential returns per unit of risk. Brompton European Dividend is currently generating about -0.09 per unit of risk. If you would invest 3,028 in BMO Aggregate Bond on August 24, 2024 and sell it today you would lose (25.00) from holding BMO Aggregate Bond or give up 0.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Aggregate Bond vs. Brompton European Dividend
Performance |
| Timeline |
| BMO Aggregate Bond |
| Brompton European |
BMO Aggregate and Brompton European Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Aggregate and Brompton European
The main advantage of trading using opposite BMO Aggregate and Brompton European positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, Brompton European 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 Brompton European will offset losses from the drop in Brompton European'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 |
| Brompton European vs. Brompton Global Dividend | Brompton European vs. Global Healthcare Income | Brompton European vs. Tech Leaders Income | Brompton European vs. Brompton North American |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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