Correlation Between BMO Aggregate and Capella Minerals

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

Diversification Opportunities for BMO Aggregate and Capella Minerals

0.26

Correlation Coefficient

BMO Aggregate  Capella Minerals

Modest diversification

The 3 months correlation between BMO and Capella is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Capella Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capella Minerals 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 Capella Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capella Minerals has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Capella Minerals go up and down completely randomly.

Pair Corralation between BMO Aggregate and Capella Minerals

Assuming the 90 days trading horizon BMO Aggregate Bond is expected to under-perform the Capella Minerals. But the etf apears to be less risky and, when comparing its historical volatility, BMO Aggregate Bond is 452.37 times less risky than Capella Minerals. The etf trades about -0.4 of its potential returns per unit of risk. The Capella Minerals is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  6.00  in Capella Minerals on October 8, 2024 and sell it today you would lose (2.00) from holding Capella Minerals or give up 33.33% of portfolio value over 90 days.

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

BMO Aggregate Bond  vs.  Capella Minerals

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.

Capella Minerals

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with BMO Aggregate and Capella Minerals

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

The idea behind BMO Aggregate Bond and Capella Minerals 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.