Correlation Between BMO Aggregate and Bitcoin ETF

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

Diversification Opportunities for BMO Aggregate and Bitcoin ETF

0.27

Correlation Coefficient

BMO Aggregate  Bitcoin ETF

Modest diversification

The 3 months correlation between BMO and Bitcoin is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Bitcoin ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitcoin ETF 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 Bitcoin ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bitcoin ETF has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Bitcoin ETF go up and down completely randomly.

Pair Corralation between BMO Aggregate and Bitcoin ETF

Assuming the 90 days trading horizon BMO Aggregate Bond is expected to under-perform the Bitcoin ETF. But the etf apears to be less risky and, when comparing its historical volatility, BMO Aggregate Bond is 9.44 times less risky than Bitcoin ETF. The etf trades about -0.01 of its potential returns per unit of risk. The Bitcoin ETF is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  2,105  in Bitcoin ETF on September 15, 2024 and sell it today you would earn a total of  1,518  from holding Bitcoin ETF or generate 72.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.75%
Values	Daily Returns

BMO Aggregate Bond  vs.  Bitcoin ETF

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. In spite of very healthy technical and fundamental indicators, BMO Aggregate is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Bitcoin ETF

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin ETF are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating forward indicators, Bitcoin ETF sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BMO Aggregate and Bitcoin ETF

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

The idea behind BMO Aggregate Bond and Bitcoin ETF 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.