Correlation Between BMO Aggregate and Mawer Equity

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

Diversification Opportunities for BMO Aggregate and Mawer Equity

-0.79

Correlation Coefficient

BMO Aggregate  Mawer Equity

Pay attention - limited upside

The 3 months correlation between BMO and Mawer is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Mawer Equity A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mawer Equity A 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 Mawer Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mawer Equity A has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Mawer Equity go up and down completely randomly.

Pair Corralation between BMO Aggregate and Mawer Equity

Assuming the 90 days trading horizon BMO Aggregate Bond is expected to under-perform the Mawer Equity. But the etf apears to be less risky and, when comparing its historical volatility, BMO Aggregate Bond is 1.93 times less risky than Mawer Equity. The etf trades about -0.05 of its potential returns per unit of risk. The Mawer Equity A is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  9,531  in Mawer Equity A on September 2, 2024 and sell it today you would earn a total of  860.00  from holding Mawer Equity A or generate 9.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.97%
Values	Daily Returns

BMO Aggregate Bond  vs.  Mawer Equity A

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.

Mawer Equity A

Risk-Adjusted Performance

17 of 100

Solid

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

Pair Trading with BMO Aggregate and Mawer Equity

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

The idea behind BMO Aggregate Bond and Mawer Equity A 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.