Correlation Between BMO Aggregate and Elcora Advanced

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

Diversification Opportunities for BMO Aggregate and Elcora Advanced

-0.42

Correlation Coefficient

BMO Aggregate  Elcora Advanced

Very good diversification

The 3 months correlation between BMO and Elcora is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Elcora Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elcora Advanced Materials 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 Elcora Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elcora Advanced Materials has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Elcora Advanced go up and down completely randomly.

Pair Corralation between BMO Aggregate and Elcora Advanced

Assuming the 90 days trading horizon BMO Aggregate is expected to generate 395.14 times less return on investment than Elcora Advanced. But when comparing it to its historical volatility, BMO Aggregate Bond is 343.01 times less risky than Elcora Advanced. It trades about 0.1 of its potential returns per unit of risk. Elcora Advanced Materials is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  20.00  in Elcora Advanced Materials on December 21, 2024 and sell it today you would lose (6.00) from holding Elcora Advanced Materials or give up 30.0% of portfolio value over 90 days.

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

BMO Aggregate Bond  vs.  Elcora Advanced Materials

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.

Elcora Advanced Materials

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elcora Advanced Materials are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Elcora Advanced showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BMO Aggregate and Elcora Advanced

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

The idea behind BMO Aggregate Bond and Elcora Advanced Materials 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.