Correlation Between BMO Aggregate and American Hotel
Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and American Hotel 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 American Hotel 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 American Hotel Income, you can compare the effects of market volatilities on BMO Aggregate and American Hotel 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 American Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and American Hotel.
Diversification Opportunities for BMO Aggregate and American Hotel
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between BMO and American is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and American Hotel Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Hotel Income 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 American Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Hotel Income has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and American Hotel go up and down completely randomly.
Pair Corralation between BMO Aggregate and American Hotel
Assuming the 90 days trading horizon BMO Aggregate Bond is expected to generate 0.1 times more return on investment than American Hotel. However, BMO Aggregate Bond is 10.22 times less risky than American Hotel. It trades about 0.13 of its potential returns per unit of risk. American Hotel Income is currently generating about -0.36 per unit of risk. If you would invest 3,015 in BMO Aggregate Bond on September 3, 2024 and sell it today you would earn a total of 21.00 from holding BMO Aggregate Bond or generate 0.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Aggregate Bond vs. American Hotel Income
Performance |
| Timeline |
| BMO Aggregate Bond |
| American Hotel Income |
BMO Aggregate and American Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Aggregate and American Hotel
The main advantage of trading using opposite BMO Aggregate and American Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, American Hotel 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 American Hotel will offset losses from the drop in American Hotel'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 |
| American Hotel vs. KDA Group | American Hotel vs. BMO Aggregate Bond | American Hotel vs. Terreno Resources Corp | American Hotel 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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