Correlation Between BMO Aggregate and Earth Alive

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

Diversification Opportunities for BMO Aggregate and Earth Alive

0.0

Correlation Coefficient

BMO Aggregate  Earth Alive

Pay attention - limited upside

The 3 months correlation between BMO and Earth is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Earth Alive Clean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Earth Alive Clean 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 Earth Alive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Earth Alive Clean has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Earth Alive go up and down completely randomly.

Pair Corralation between BMO Aggregate and Earth Alive

If you would invest  0.50  in Earth Alive Clean on October 9, 2024 and sell it today you would earn a total of  0.00  from holding Earth Alive Clean or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

BMO Aggregate Bond  vs.  Earth Alive Clean

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.

Earth Alive Clean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Earth Alive Clean has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Earth Alive is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with BMO Aggregate and Earth Alive

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

The idea behind BMO Aggregate Bond and Earth Alive Clean 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.