Correlation Between BMO Aggregate and CI Global

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

Diversification Opportunities for BMO Aggregate and CI Global

-0.06

Correlation Coefficient

BMO Aggregate  CI Global

Good diversification

The 3 months correlation between BMO and CGRA is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and CI Global Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Global Real 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 CI Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Global Real has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and CI Global go up and down completely randomly.

Pair Corralation between BMO Aggregate and CI Global

Assuming the 90 days trading horizon BMO Aggregate is expected to generate 3.13 times less return on investment than CI Global. But when comparing it to its historical volatility, BMO Aggregate Bond is 2.0 times less risky than CI Global. It trades about 0.05 of its potential returns per unit of risk. CI Global Real is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,947  in CI Global Real on September 12, 2024 and sell it today you would earn a total of  350.00  from holding CI Global Real or generate 17.98% return on investment over 90 days.

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

BMO Aggregate Bond  vs.  CI Global Real

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.

CI Global Real

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CI Global Real are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CI Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BMO Aggregate and CI Global

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

The idea behind BMO Aggregate Bond and CI Global Real 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..