Correlation Between BMO Aggregate and Manulife Multifactor
Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and Manulife Multifactor 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 Manulife Multifactor 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 Manulife Multifactor Mid, you can compare the effects of market volatilities on BMO Aggregate and Manulife Multifactor 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 Manulife Multifactor. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and Manulife Multifactor.
Diversification Opportunities for BMO Aggregate and Manulife Multifactor
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BMO and Manulife is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Manulife Multifactor Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife Multifactor Mid 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 Manulife Multifactor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manulife Multifactor Mid has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Manulife Multifactor go up and down completely randomly.
Pair Corralation between BMO Aggregate and Manulife Multifactor
Assuming the 90 days trading horizon BMO Aggregate Bond is expected to generate 0.59 times more return on investment than Manulife Multifactor. However, BMO Aggregate Bond is 1.7 times less risky than Manulife Multifactor. It trades about 0.09 of its potential returns per unit of risk. Manulife Multifactor Mid is currently generating about -0.21 per unit of risk. If you would invest 2,996 in BMO Aggregate Bond on November 28, 2024 and sell it today you would earn a total of 23.00 from holding BMO Aggregate Bond or generate 0.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Aggregate Bond vs. Manulife Multifactor Mid
Performance |
| Timeline |
| BMO Aggregate Bond |
| Manulife Multifactor Mid |
BMO Aggregate and Manulife Multifactor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Aggregate and Manulife Multifactor
The main advantage of trading using opposite BMO Aggregate and Manulife Multifactor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, Manulife Multifactor 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 Manulife Multifactor will offset losses from the drop in Manulife Multifactor'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 |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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