Correlation Between BMO Aggregate and Cariboo Rose

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

Diversification Opportunities for BMO Aggregate and Cariboo Rose

0.04

Correlation Coefficient

BMO Aggregate  Cariboo Rose

Significant diversification

The 3 months correlation between BMO and Cariboo is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Cariboo Rose Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cariboo Rose Resources 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 Cariboo Rose. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cariboo Rose Resources has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Cariboo Rose go up and down completely randomly.

Pair Corralation between BMO Aggregate and Cariboo Rose

Assuming the 90 days trading horizon BMO Aggregate is expected to generate 12.53 times less return on investment than Cariboo Rose. But when comparing it to its historical volatility, BMO Aggregate Bond is 27.43 times less risky than Cariboo Rose. It trades about 0.1 of its potential returns per unit of risk. Cariboo Rose Resources is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5.00  in Cariboo Rose Resources on December 22, 2024 and sell it today you would earn a total of  0.00  from holding Cariboo Rose Resources or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

BMO Aggregate Bond  vs.  Cariboo Rose Resources

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.

Cariboo Rose Resources

Risk-Adjusted Performance

Insignificant

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

Pair Trading with BMO Aggregate and Cariboo Rose

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

The idea behind BMO Aggregate Bond and Cariboo Rose Resources 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.