Correlation Between BMO Aggregate and CI Enhanced

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

Diversification Opportunities for BMO Aggregate and CI Enhanced

0.67

Correlation Coefficient

BMO Aggregate  CI Enhanced

Poor diversification

The 3 months correlation between BMO and FSB is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and CI Enhanced Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Enhanced Short 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 CI Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Enhanced Short has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and CI Enhanced go up and down completely randomly.

Pair Corralation between BMO Aggregate and CI Enhanced

Assuming the 90 days trading horizon BMO Aggregate Bond is expected to under-perform the CI Enhanced. In addition to that, BMO Aggregate is 1.83 times more volatile than CI Enhanced Short. It trades about -0.14 of its total potential returns per unit of risk. CI Enhanced Short is currently generating about -0.02 per unit of volatility. If you would invest  971.00  in CI Enhanced Short on September 13, 2024 and sell it today you would lose (2.00) from holding CI Enhanced Short or give up 0.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

BMO Aggregate Bond  vs.  CI Enhanced Short

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.

CI Enhanced Short

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CI Enhanced Short has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, CI Enhanced is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BMO Aggregate and CI Enhanced

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

The idea behind BMO Aggregate Bond and CI Enhanced Short 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..