Correlation Between BMO Aggregate and European Residential
Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and European Residential 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 European Residential 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 European Residential Real, you can compare the effects of market volatilities on BMO Aggregate and European Residential 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 European Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and European Residential.
Diversification Opportunities for BMO Aggregate and European Residential
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BMO and European is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and European Residential Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Residential Real 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 European Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Residential Real has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and European Residential go up and down completely randomly.
Pair Corralation between BMO Aggregate and European Residential
Assuming the 90 days trading horizon BMO Aggregate is expected to generate 24.71 times less return on investment than European Residential. But when comparing it to its historical volatility, BMO Aggregate Bond is 4.84 times less risky than European Residential. It trades about 0.01 of its potential returns per unit of risk. European Residential Real is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 282.00 in European Residential Real on August 29, 2024 and sell it today you would earn a total of 85.00 from holding European Residential Real or generate 30.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 94.14% |
| Values | Daily Returns |
BMO Aggregate Bond vs. European Residential Real
Performance |
| Timeline |
| BMO Aggregate Bond |
| European Residential Real |
BMO Aggregate and European Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Aggregate and European Residential
The main advantage of trading using opposite BMO Aggregate and European Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, European Residential 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 European Residential will offset losses from the drop in European Residential'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 |
| European Residential vs. BSR Real Estate | European Residential vs. Minto Apartment Real | European Residential vs. Nexus Real Estate | European Residential vs. Morguard 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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