Correlation Between BMO Aggregate and First National
Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and First National 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 First National 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 First National Financial, you can compare the effects of market volatilities on BMO Aggregate and First National 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 First National. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and First National.
Diversification Opportunities for BMO Aggregate and First National
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BMO and First is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and First National Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National 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 First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Financial has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and First National go up and down completely randomly.
Pair Corralation between BMO Aggregate and First National
Assuming the 90 days trading horizon BMO Aggregate is expected to generate 23.64 times less return on investment than First National. But when comparing it to its historical volatility, BMO Aggregate Bond is 2.5 times less risky than First National. It trades about 0.01 of its potential returns per unit of risk. First National Financial is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,067 in First National Financial on August 30, 2024 and sell it today you would earn a total of 381.00 from holding First National Financial or generate 35.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.33% |
| Values | Daily Returns |
BMO Aggregate Bond vs. First National Financial
Performance |
| Timeline |
| BMO Aggregate Bond |
| First National Financial |
BMO Aggregate and First National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Aggregate and First National
The main advantage of trading using opposite BMO Aggregate and First National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, First National 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 First National will offset losses from the drop in First National'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 |
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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