Correlation Between BMO Aggregate and Guardian Directed

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

Diversification Opportunities for BMO Aggregate and Guardian Directed

0.17

Correlation Coefficient

BMO Aggregate  Guardian Directed

Average diversification

The 3 months correlation between BMO and Guardian is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Guardian Directed Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian Directed Premium 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 Guardian Directed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardian Directed Premium has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Guardian Directed go up and down completely randomly.

Pair Corralation between BMO Aggregate and Guardian Directed

Assuming the 90 days trading horizon BMO Aggregate Bond is expected to under-perform the Guardian Directed. But the etf apears to be less risky and, when comparing its historical volatility, BMO Aggregate Bond is 1.6 times less risky than Guardian Directed. The etf trades about 0.0 of its potential returns per unit of risk. The Guardian Directed Premium is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,019  in Guardian Directed Premium on September 14, 2024 and sell it today you would earn a total of  167.00  from holding Guardian Directed Premium or generate 8.27% return on investment over 90 days.

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

BMO Aggregate Bond  vs.  Guardian Directed Premium

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.

Guardian Directed Premium

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guardian Directed Premium are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Guardian Directed may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BMO Aggregate and Guardian Directed

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

The idea behind BMO Aggregate Bond and Guardian Directed Premium 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.