Correlation Between BMO Aggregate and Evolve Active

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

Diversification Opportunities for BMO Aggregate and Evolve Active

0.86

Correlation Coefficient

BMO Aggregate  Evolve Active

Very poor diversification

The 3 months correlation between BMO and Evolve is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Evolve Active Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolve Active Core 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 Evolve Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolve Active Core has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Evolve Active go up and down completely randomly.

Pair Corralation between BMO Aggregate and Evolve Active

Assuming the 90 days trading horizon BMO Aggregate is expected to generate 1.06 times less return on investment than Evolve Active. In addition to that, BMO Aggregate is 1.14 times more volatile than Evolve Active Core. It trades about 0.07 of its total potential returns per unit of risk. Evolve Active Core is currently generating about 0.08 per unit of volatility. If you would invest  1,795  in Evolve Active Core on December 29, 2024 and sell it today you would earn a total of  29.00  from holding Evolve Active Core or generate 1.62% return on investment over 90 days.

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

BMO Aggregate Bond  vs.  Evolve Active Core

BMO Aggregate Bond

Risk-Adjusted Performance

Insignificant

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.

Evolve Active Core

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Evolve Active Core are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Evolve Active is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BMO Aggregate and Evolve Active

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

The idea behind BMO Aggregate Bond and Evolve Active Core 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.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.