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 Equity, 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

-0.76

Correlation Coefficient

BMO Aggregate  Guardian Directed

Pay attention - limited upside

The 3 months correlation between BMO and Guardian is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Guardian Directed Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian Directed Equity 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 Equity 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 1.32 times less risky than Guardian Directed. The etf trades about -0.14 of its potential returns per unit of risk. The Guardian Directed Equity is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,986  in Guardian Directed Equity on September 12, 2024 and sell it today you would earn a total of  75.00  from holding Guardian Directed Equity or generate 3.78% return on investment over 90 days.

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

BMO Aggregate Bond  vs.  Guardian Directed Equity

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.

Guardian Directed Equity

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guardian Directed Equity are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Guardian Directed 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 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 Equity 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.