Correlation Between BMO Aggregate and TD Equity
Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and TD Equity 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 TD Equity 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 TD Equity CAD, you can compare the effects of market volatilities on BMO Aggregate and TD Equity 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 TD Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and TD Equity.
Diversification Opportunities for BMO Aggregate and TD Equity
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between BMO and THU is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and TD Equity CAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Equity CAD 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 TD Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Equity CAD has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and TD Equity go up and down completely randomly.
Pair Corralation between BMO Aggregate and TD Equity
Assuming the 90 days trading horizon BMO Aggregate Bond is expected to under-perform the TD Equity. But the etf apears to be less risky and, when comparing its historical volatility, BMO Aggregate Bond is 2.42 times less risky than TD Equity. The etf trades about -0.02 of its potential returns per unit of risk. The TD Equity CAD is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 3,495 in TD Equity CAD on September 4, 2024 and sell it today you would earn a total of 549.00 from holding TD Equity CAD or generate 15.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.81% |
| Values | Daily Returns |
BMO Aggregate Bond vs. TD Equity CAD
Performance |
| Timeline |
| BMO Aggregate Bond |
| TD Equity CAD |
BMO Aggregate and TD Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Aggregate and TD Equity
The main advantage of trading using opposite BMO Aggregate and TD Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, TD Equity 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 TD Equity will offset losses from the drop in TD Equity'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 |
| TD Equity vs. Franklin Bissett Corporate | TD Equity vs. FT AlphaDEX Industrials | TD Equity vs. Dynamic Active Dividend | TD Equity vs. BMO Aggregate Bond |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
Other Complementary Tools
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation |