Correlation Between BMO Aggregate and Banyan Gold

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

Diversification Opportunities for BMO Aggregate and Banyan Gold

0.69

Correlation Coefficient

BMO Aggregate  Banyan Gold

Poor diversification

The 3 months correlation between BMO and Banyan is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Banyan Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banyan Gold Corp 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 Banyan Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banyan Gold Corp has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Banyan Gold go up and down completely randomly.

Pair Corralation between BMO Aggregate and Banyan Gold

Assuming the 90 days trading horizon BMO Aggregate is expected to generate 11.26 times less return on investment than Banyan Gold. But when comparing it to its historical volatility, BMO Aggregate Bond is 10.39 times less risky than Banyan Gold. It trades about 0.1 of its potential returns per unit of risk. Banyan Gold Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  19.00  in Banyan Gold Corp on December 21, 2024 and sell it today you would earn a total of  4.00  from holding Banyan Gold Corp or generate 21.05% return on investment over 90 days.

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

BMO Aggregate Bond  vs.  Banyan Gold Corp

BMO Aggregate Bond

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Aggregate Bond are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. 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.

Banyan Gold Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Banyan Gold Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Banyan Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BMO Aggregate and Banyan Gold

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

The idea behind BMO Aggregate Bond and Banyan Gold Corp 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.