Correlation Between First Trust and BMO Aggregate
Can any of the company-specific risk be diversified away by investing in both First Trust and BMO Aggregate 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 First Trust and BMO Aggregate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Indxx and BMO Aggregate Bond, you can compare the effects of market volatilities on First Trust and BMO Aggregate 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 First Trust with a short position of BMO Aggregate. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and BMO Aggregate.
Diversification Opportunities for First Trust and BMO Aggregate
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between First and BMO is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Indxx and BMO Aggregate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Aggregate Bond and First Trust 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 First Trust Indxx are associated (or correlated) with BMO Aggregate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Aggregate Bond has no effect on the direction of First Trust i.e., First Trust and BMO Aggregate go up and down completely randomly.
Pair Corralation between First Trust and BMO Aggregate
Assuming the 90 days trading horizon First Trust Indxx is expected to generate 2.57 times more return on investment than BMO Aggregate. However, First Trust is 2.57 times more volatile than BMO Aggregate Bond. It trades about 0.15 of its potential returns per unit of risk. BMO Aggregate Bond is currently generating about 0.06 per unit of risk. If you would invest 1,153 in First Trust Indxx on December 1, 2024 and sell it today you would earn a total of 104.00 from holding First Trust Indxx or generate 9.02% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
First Trust Indxx vs. BMO Aggregate Bond
Performance |
Timeline |
First Trust Indxx |
BMO Aggregate Bond |
First Trust and BMO Aggregate Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Trust and BMO Aggregate
The main advantage of trading using opposite First Trust and BMO Aggregate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, BMO Aggregate 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 Aggregate will offset losses from the drop in BMO Aggregate's long position.First Trust vs. First Trust Indxx | First Trust vs. First Trust Senior | First Trust vs. First Trust AlphaDEX | First Trust vs. First Trust Indxx |
BMO Aggregate vs. iShares Core MSCI | BMO Aggregate vs. Vanguard FTSE Canada | BMO Aggregate vs. Vanguard Canadian Aggregate | BMO Aggregate vs. iShares Core MSCI |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments |