Correlation Between BMO Aggregate and Capitan Mining

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

Diversification Opportunities for BMO Aggregate and Capitan Mining

0.53

Correlation Coefficient

BMO Aggregate  Capitan Mining

Very weak diversification

The 3 months correlation between BMO and Capitan is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Capitan Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capitan Mining 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 Capitan Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capitan Mining has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Capitan Mining go up and down completely randomly.

Pair Corralation between BMO Aggregate and Capitan Mining

Assuming the 90 days trading horizon BMO Aggregate is expected to generate 26.59 times less return on investment than Capitan Mining. But when comparing it to its historical volatility, BMO Aggregate Bond is 22.58 times less risky than Capitan Mining. It trades about 0.1 of its potential returns per unit of risk. Capitan Mining is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  28.00  in Capitan Mining on December 23, 2024 and sell it today you would earn a total of  13.00  from holding Capitan Mining or generate 46.43% 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.  Capitan Mining

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.

Capitan Mining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capitan Mining are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Capitan Mining showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BMO Aggregate and Capitan Mining

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

The idea behind BMO Aggregate Bond and Capitan Mining 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.