Correlation Between BMO Aggregate and Pembina Pipeline

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

Diversification Opportunities for BMO Aggregate and Pembina Pipeline

0.33

Correlation Coefficient

BMO Aggregate  Pembina Pipeline

Weak diversification

The 3 months correlation between BMO and Pembina is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Pembina Pipeline Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pembina Pipeline Corp 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 Pembina Pipeline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pembina Pipeline Corp has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Pembina Pipeline go up and down completely randomly.

Pair Corralation between BMO Aggregate and Pembina Pipeline

Assuming the 90 days trading horizon BMO Aggregate Bond is expected to under-perform the Pembina Pipeline. But the etf apears to be less risky and, when comparing its historical volatility, BMO Aggregate Bond is 1.93 times less risky than Pembina Pipeline. The etf trades about -0.09 of its potential returns per unit of risk. The Pembina Pipeline Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,350  in Pembina Pipeline Corp on September 22, 2024 and sell it today you would earn a total of  28.00  from holding Pembina Pipeline Corp or generate 1.19% return on investment over 90 days.

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

BMO Aggregate Bond  vs.  Pembina Pipeline Corp

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.

Pembina Pipeline Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pembina Pipeline Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Pembina Pipeline is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BMO Aggregate and Pembina Pipeline

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

The idea behind BMO Aggregate Bond and Pembina Pipeline Corp 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.