Correlation Between BMO Aggregate and Highway 50

Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and Highway 50 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 Highway 50 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 Highway 50 Gold, you can compare the effects of market volatilities on BMO Aggregate and Highway 50 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 Highway 50. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and Highway 50.

Diversification Opportunities for BMO Aggregate and Highway 50

0.52

Correlation Coefficient

BMO Aggregate  Highway 50

Very weak diversification

The 3 months correlation between BMO and Highway is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Highway 50 Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highway 50 Gold 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 Highway 50. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highway 50 Gold has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Highway 50 go up and down completely randomly.

Pair Corralation between BMO Aggregate and Highway 50

Assuming the 90 days trading horizon BMO Aggregate is expected to generate 227.14 times less return on investment than Highway 50. But when comparing it to its historical volatility, BMO Aggregate Bond is 18.78 times less risky than Highway 50. It trades about 0.0 of its potential returns per unit of risk. Highway 50 Gold is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Highway 50 Gold on October 22, 2024 and sell it today you would earn a total of  4.00  from holding Highway 50 Gold or generate 40.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.74%
Values	Daily Returns

BMO Aggregate Bond  vs.  Highway 50 Gold

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.

Highway 50 Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Highway 50 Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Highway 50 is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with BMO Aggregate and Highway 50

The main advantage of trading using opposite BMO Aggregate and Highway 50 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, Highway 50 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 Highway 50 will offset losses from the drop in Highway 50's long position.

The idea behind BMO Aggregate Bond and Highway 50 Gold 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..