Correlation Between BMO Aggregate and Power Financial
Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and Power Financial 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 Power Financial 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 Power Financial Corp, you can compare the effects of market volatilities on BMO Aggregate and Power Financial 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 Power Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and Power Financial.
Diversification Opportunities for BMO Aggregate and Power Financial
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BMO and Power is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Power Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Financial Corp 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 Power Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Financial Corp has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Power Financial go up and down completely randomly.
Pair Corralation between BMO Aggregate and Power Financial
Assuming the 90 days trading horizon BMO Aggregate Bond is expected to generate 0.45 times more return on investment than Power Financial. However, BMO Aggregate Bond is 2.23 times less risky than Power Financial. It trades about 0.13 of its potential returns per unit of risk. Power Financial Corp is currently generating about -0.04 per unit of risk. If you would invest 3,015 in BMO Aggregate Bond on September 1, 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 | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
BMO Aggregate Bond vs. Power Financial Corp
Performance |
| Timeline |
| BMO Aggregate Bond |
| Power Financial Corp |
BMO Aggregate and Power Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Aggregate and Power Financial
The main advantage of trading using opposite BMO Aggregate and Power Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, Power Financial 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 Power Financial will offset losses from the drop in Power Financial'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 |
| Power Financial vs. Great West Lifeco | Power Financial vs. Power Financial Corp | Power Financial vs. Power Financial 51 | Power Financial vs. Intact Financial Corp |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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