Correlation Between BMO Aggregate and Newcore Gold

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

Diversification Opportunities for BMO Aggregate and Newcore Gold

0.54

Correlation Coefficient

BMO Aggregate  Newcore Gold

Very weak diversification

The 3 months correlation between BMO and Newcore is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Newcore Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newcore 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 Newcore Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newcore Gold has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Newcore Gold go up and down completely randomly.

Pair Corralation between BMO Aggregate and Newcore Gold

Assuming the 90 days trading horizon BMO Aggregate is expected to generate 39.88 times less return on investment than Newcore Gold. But when comparing it to its historical volatility, BMO Aggregate Bond is 12.41 times less risky than Newcore Gold. It trades about 0.1 of its potential returns per unit of risk. Newcore Gold is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  31.00  in Newcore Gold on December 22, 2024 and sell it today you would earn a total of  34.00  from holding Newcore Gold or generate 109.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

BMO Aggregate Bond  vs.  Newcore Gold

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.

Newcore Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Newcore Gold are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Newcore Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BMO Aggregate and Newcore Gold

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

The idea behind BMO Aggregate Bond and Newcore 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.