Correlation Between BMO Aggregate and BMO Mid
Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and BMO Mid 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 BMO Mid 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 BMO Mid Corporate, you can compare the effects of market volatilities on BMO Aggregate and BMO Mid 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 BMO Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and BMO Mid.
Diversification Opportunities for BMO Aggregate and BMO Mid
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between BMO and BMO is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and BMO Mid Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Mid Corporate 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 BMO Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Mid Corporate has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and BMO Mid go up and down completely randomly.
Pair Corralation between BMO Aggregate and BMO Mid
Assuming the 90 days trading horizon BMO Aggregate Bond is expected to under-perform the BMO Mid. But the etf apears to be less risky and, when comparing its historical volatility, BMO Aggregate Bond is 1.53 times less risky than BMO Mid. The etf trades about -0.21 of its potential returns per unit of risk. The BMO Mid Corporate is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest 1,539 in BMO Mid Corporate on August 24, 2024 and sell it today you would lose (11.00) from holding BMO Mid Corporate or give up 0.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
BMO Aggregate Bond vs. BMO Mid Corporate
Performance |
| Timeline |
| BMO Aggregate Bond |
| BMO Mid Corporate |
BMO Aggregate and BMO Mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Aggregate and BMO Mid
The main advantage of trading using opposite BMO Aggregate and BMO Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, BMO Mid 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 BMO Mid will offset losses from the drop in BMO Mid'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 |
| BMO Mid vs. Franklin Global Aggregate | BMO Mid vs. Franklin Large Cap | BMO Mid vs. First Trust Senior | BMO Mid 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 CEOs Directory module to screen CEOs from public companies around the world.
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