Correlation Between BMO Aggregate and Gold79 Mines

Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and Gold79 Mines 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 Gold79 Mines 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 Gold79 Mines, you can compare the effects of market volatilities on BMO Aggregate and Gold79 Mines 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 Gold79 Mines. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and Gold79 Mines.

Diversification Opportunities for BMO Aggregate and Gold79 Mines

-0.29

Correlation Coefficient

BMO Aggregate  Gold79 Mines

Very good diversification

The 3 months correlation between BMO and Gold79 is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Gold79 Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold79 Mines 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 Gold79 Mines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold79 Mines has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Gold79 Mines go up and down completely randomly.

Pair Corralation between BMO Aggregate and Gold79 Mines

Assuming the 90 days trading horizon BMO Aggregate is expected to generate 293.61 times less return on investment than Gold79 Mines. But when comparing it to its historical volatility, BMO Aggregate Bond is 30.22 times less risky than Gold79 Mines. It trades about 0.0 of its potential returns per unit of risk. Gold79 Mines is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  40.00  in Gold79 Mines on October 8, 2024 and sell it today you would lose (7.00) from holding Gold79 Mines or give up 17.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

BMO Aggregate Bond  vs.  Gold79 Mines

BMO Aggregate Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BMO Aggregate Bond has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BMO Aggregate is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Gold79 Mines

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gold79 Mines are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Gold79 Mines showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BMO Aggregate and Gold79 Mines

The main advantage of trading using opposite BMO Aggregate and Gold79 Mines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, Gold79 Mines 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 Gold79 Mines will offset losses from the drop in Gold79 Mines' long position.

The idea behind BMO Aggregate Bond and Gold79 Mines 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.