Correlation Between BMO Aggregate and Enduro Metals

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

Diversification Opportunities for BMO Aggregate and Enduro Metals

0.58

Correlation Coefficient

BMO Aggregate  Enduro Metals

Very weak diversification

The 3 months correlation between BMO and Enduro is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Enduro Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enduro Metals Corp 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 Enduro Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enduro Metals Corp has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Enduro Metals go up and down completely randomly.

Pair Corralation between BMO Aggregate and Enduro Metals

Assuming the 90 days trading horizon BMO Aggregate Bond is expected to generate 0.05 times more return on investment than Enduro Metals. However, BMO Aggregate Bond is 18.85 times less risky than Enduro Metals. It trades about -0.16 of its potential returns per unit of risk. Enduro Metals Corp is currently generating about -0.11 per unit of risk. If you would invest  3,054  in BMO Aggregate Bond on October 8, 2024 and sell it today you would lose (75.00) from holding BMO Aggregate Bond or give up 2.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

BMO Aggregate Bond  vs.  Enduro Metals Corp

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.

Enduro Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enduro Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with BMO Aggregate and Enduro Metals

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

The idea behind BMO Aggregate Bond and Enduro Metals Corp 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.