Correlation Between BMO Aggregate and Mundoro Capital

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

Diversification Opportunities for BMO Aggregate and Mundoro Capital

0.11

Correlation Coefficient

BMO Aggregate  Mundoro Capital

Average diversification

The 3 months correlation between BMO and Mundoro is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Mundoro Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mundoro Capital 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 Mundoro Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mundoro Capital has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Mundoro Capital go up and down completely randomly.

Pair Corralation between BMO Aggregate and Mundoro Capital

Assuming the 90 days trading horizon BMO Aggregate Bond is expected to generate 0.14 times more return on investment than Mundoro Capital. However, BMO Aggregate Bond is 7.35 times less risky than Mundoro Capital. It trades about -0.11 of its potential returns per unit of risk. Mundoro Capital is currently generating about -0.06 per unit of risk. If you would invest  3,015  in BMO Aggregate Bond on October 6, 2024 and sell it today you would lose (36.00) from holding BMO Aggregate Bond or give up 1.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

BMO Aggregate Bond  vs.  Mundoro Capital

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.

Mundoro Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mundoro Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Mundoro Capital 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 Mundoro Capital

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

The idea behind BMO Aggregate Bond and Mundoro Capital 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.