Correlation Between BMO Aggregate and Fidelity All

Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and Fidelity All 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 Fidelity All 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 Fidelity All in One Balanced, you can compare the effects of market volatilities on BMO Aggregate and Fidelity All 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 Fidelity All. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and Fidelity All.

Diversification Opportunities for BMO Aggregate and Fidelity All

0.59

Correlation Coefficient

BMO Aggregate  Fidelity All

Very weak diversification

The 3 months correlation between BMO and Fidelity is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Fidelity All in One Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity All in 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 Fidelity All. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity All in has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Fidelity All go up and down completely randomly.

Pair Corralation between BMO Aggregate and Fidelity All

Assuming the 90 days trading horizon BMO Aggregate Bond is expected to generate about the same return on investment as Fidelity All in One Balanced. But, BMO Aggregate Bond is 1.42 times less risky than Fidelity All. It trades about 0.08 of its potential returns per unit of risk. Fidelity All in One Balanced is currently generating about 0.05 per unit of risk. If you would invest  1,297  in Fidelity All in One Balanced on December 27, 2024 and sell it today you would earn a total of  22.00  from holding Fidelity All in One Balanced or generate 1.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

BMO Aggregate Bond  vs.  Fidelity All in One Balanced

BMO Aggregate Bond

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Aggregate Bond are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, BMO Aggregate is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Fidelity All in

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity All in One Balanced are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Fidelity All is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BMO Aggregate and Fidelity All

The main advantage of trading using opposite BMO Aggregate and Fidelity All positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, Fidelity All 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 Fidelity All will offset losses from the drop in Fidelity All's long position.

The idea behind BMO Aggregate Bond and Fidelity All in One Balanced pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.