Correlation Between BMO Aggregate and Toronto Dominion
Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and Toronto Dominion 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 Toronto Dominion 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 Toronto Dominion Bank, you can compare the effects of market volatilities on BMO Aggregate and Toronto Dominion 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 Toronto Dominion. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and Toronto Dominion.
Diversification Opportunities for BMO Aggregate and Toronto Dominion
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between BMO and Toronto is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Toronto Dominion Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toronto Dominion Bank 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 Toronto Dominion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toronto Dominion Bank has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Toronto Dominion go up and down completely randomly.
Pair Corralation between BMO Aggregate and Toronto Dominion
Assuming the 90 days trading horizon BMO Aggregate Bond is expected to under-perform the Toronto Dominion. But the etf apears to be less risky and, when comparing its historical volatility, BMO Aggregate Bond is 1.22 times less risky than Toronto Dominion. The etf trades about -0.21 of its potential returns per unit of risk. The Toronto Dominion Bank is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 2,379 in Toronto Dominion Bank on August 25, 2024 and sell it today you would earn a total of 28.00 from holding Toronto Dominion Bank or generate 1.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 77.27% |
| Values | Daily Returns |
BMO Aggregate Bond vs. Toronto Dominion Bank
Performance |
| Timeline |
| BMO Aggregate Bond |
| Toronto Dominion Bank |
BMO Aggregate and Toronto Dominion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Aggregate and Toronto Dominion
The main advantage of trading using opposite BMO Aggregate and Toronto Dominion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, Toronto Dominion 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 Toronto Dominion will offset losses from the drop in Toronto Dominion'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 |
| Toronto Dominion vs. Forstrong Global Income | Toronto Dominion vs. BMO Aggregate Bond | Toronto Dominion vs. Terreno Resources Corp | Toronto Dominion 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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