Correlation Between BMO Aggregate and North American
Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and North American 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 North American 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 North American Financial, you can compare the effects of market volatilities on BMO Aggregate and North American 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 North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and North American.
Diversification Opportunities for BMO Aggregate and North American
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between BMO and North is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and North American Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Financial 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Financial has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and North American go up and down completely randomly.
Pair Corralation between BMO Aggregate and North American
Assuming the 90 days trading horizon BMO Aggregate is expected to generate 5.16 times less return on investment than North American. In addition to that, BMO Aggregate is 1.02 times more volatile than North American Financial. It trades about 0.1 of its total potential returns per unit of risk. North American Financial is currently generating about 0.5 per unit of volatility. If you would invest 1,032 in North American Financial on August 27, 2024 and sell it today you would earn a total of 27.00 from holding North American Financial or generate 2.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Aggregate Bond vs. North American Financial
Performance |
| Timeline |
| BMO Aggregate Bond |
| North American Financial |
BMO Aggregate and North American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Aggregate and North American
The main advantage of trading using opposite BMO Aggregate and North American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, North American 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 North American will offset losses from the drop in North American'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 |
| North American vs. Forstrong Global Income | North American vs. BMO Aggregate Bond | North American vs. Terreno Resources Corp | North American vs. iShares Canadian HYBrid |
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 CEOs Directory module to screen CEOs from public companies around the world.
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