Correlation Between BMO Aggregate and Caldwell Partners

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

Diversification Opportunities for BMO Aggregate and Caldwell Partners

-0.87

Correlation Coefficient

BMO Aggregate  Caldwell Partners

Pay attention - limited upside

The 3 months correlation between BMO and Caldwell is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Caldwell Partners Internationa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caldwell Partners 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 Caldwell Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caldwell Partners has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Caldwell Partners go up and down completely randomly.

Pair Corralation between BMO Aggregate and Caldwell Partners

Assuming the 90 days trading horizon BMO Aggregate Bond is expected to generate 0.08 times more return on investment than Caldwell Partners. However, BMO Aggregate Bond is 12.99 times less risky than Caldwell Partners. It trades about 0.07 of its potential returns per unit of risk. Caldwell Partners International is currently generating about -0.09 per unit of risk. If you would invest  2,979  in BMO Aggregate Bond on December 30, 2024 and sell it today you would earn a total of  47.00  from holding BMO Aggregate Bond or generate 1.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

BMO Aggregate Bond  vs.  Caldwell Partners Internationa

BMO Aggregate Bond

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Aggregate Bond are ranked lower than 5 (%) 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.

Caldwell Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Caldwell Partners International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with BMO Aggregate and Caldwell Partners

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

The idea behind BMO Aggregate Bond and Caldwell Partners International 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.