Correlation Between BMO Aggregate and Sun Life
Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and Sun Life 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 Sun Life 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 Sun Life Non, you can compare the effects of market volatilities on BMO Aggregate and Sun Life 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 Sun Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and Sun Life.
Diversification Opportunities for BMO Aggregate and Sun Life
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BMO and Sun is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Sun Life Non in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Life Non 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 Sun Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Life Non has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Sun Life go up and down completely randomly.
Pair Corralation between BMO Aggregate and Sun Life
Assuming the 90 days trading horizon BMO Aggregate is expected to generate 2.0 times less return on investment than Sun Life. But when comparing it to its historical volatility, BMO Aggregate Bond is 2.05 times less risky than Sun Life. It trades about 0.09 of its potential returns per unit of risk. Sun Life Non is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,625 in Sun Life Non on August 28, 2024 and sell it today you would earn a total of 16.00 from holding Sun Life Non or generate 0.98% 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. Sun Life Non
Performance |
| Timeline |
| BMO Aggregate Bond |
| Sun Life Non |
BMO Aggregate and Sun Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Aggregate and Sun Life
The main advantage of trading using opposite BMO Aggregate and Sun Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, Sun Life 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 Sun Life will offset losses from the drop in Sun Life'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 |
| Sun Life vs. Forstrong Global Income | Sun Life vs. BMO Aggregate Bond | Sun Life vs. Terreno Resources Corp | Sun Life 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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