Correlation Between PIMCO Low and BMO Canadian

Can any of the company-specific risk be diversified away by investing in both PIMCO Low and BMO Canadian 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 PIMCO Low and BMO Canadian into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PIMCO Low Duration and BMO Canadian High, you can compare the effects of market volatilities on PIMCO Low and BMO Canadian 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 PIMCO Low with a short position of BMO Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO Low and BMO Canadian.

Diversification Opportunities for PIMCO Low and BMO Canadian

0.94

Correlation Coefficient

PIMCO Low  BMO Canadian

Almost no diversification

The 3 months correlation between PIMCO and BMO is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO Low Duration and BMO Canadian High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Canadian High and PIMCO Low 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 PIMCO Low Duration are associated (or correlated) with BMO Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Canadian High has no effect on the direction of PIMCO Low i.e., PIMCO Low and BMO Canadian go up and down completely randomly.

Pair Corralation between PIMCO Low and BMO Canadian

Assuming the 90 days trading horizon PIMCO Low is expected to generate 2.41 times less return on investment than BMO Canadian. But when comparing it to its historical volatility, PIMCO Low Duration is 1.39 times less risky than BMO Canadian. It trades about 0.23 of its potential returns per unit of risk. BMO Canadian High is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  1,746  in BMO Canadian High on April 24, 2025 and sell it today you would earn a total of  135.00  from holding BMO Canadian High or generate 7.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

PIMCO Low Duration  vs.  BMO Canadian High

PIMCO Low Duration

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO Low Duration are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, PIMCO Low is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

BMO Canadian High

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Canadian High are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, BMO Canadian may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with PIMCO Low and BMO Canadian

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

The idea behind PIMCO Low Duration and BMO Canadian High 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.