Correlation Between BMO Aggregate and IA Clarington

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

Diversification Opportunities for BMO Aggregate and IA Clarington

0.57

Correlation Coefficient

BMO Aggregate  IA Clarington

Very weak diversification

The 3 months correlation between BMO and ISIF is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and IA Clarington Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IA Clarington Strategic 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 IA Clarington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IA Clarington Strategic has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and IA Clarington go up and down completely randomly.

Pair Corralation between BMO Aggregate and IA Clarington

Assuming the 90 days trading horizon BMO Aggregate Bond is expected to under-perform the IA Clarington. But the etf apears to be less risky and, when comparing its historical volatility, BMO Aggregate Bond is 1.36 times less risky than IA Clarington. The etf trades about 0.0 of its potential returns per unit of risk. The IA Clarington Strategic is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,043  in IA Clarington Strategic on October 22, 2024 and sell it today you would earn a total of  150.00  from holding IA Clarington Strategic or generate 14.38% return on investment over 90 days.

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

BMO Aggregate Bond  vs.  IA Clarington Strategic

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.

IA Clarington Strategic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IA Clarington Strategic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IA Clarington 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 IA Clarington

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

The idea behind BMO Aggregate Bond and IA Clarington Strategic 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.