Correlation Between FT AlphaDEX and BMO NASDAQ

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

By analyzing existing cross correlation between FT AlphaDEX Industrials and BMO NASDAQ 100, you can compare the effects of market volatilities on FT AlphaDEX and BMO NASDAQ 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 FT AlphaDEX with a short position of BMO NASDAQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT AlphaDEX and BMO NASDAQ.

Diversification Opportunities for FT AlphaDEX and BMO NASDAQ

-0.14

Correlation Coefficient

FT AlphaDEX  BMO NASDAQ

Good diversification

The 3 months correlation between FHG and BMO is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding FT AlphaDEX Industrials and BMO NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO NASDAQ 100 and FT AlphaDEX 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 FT AlphaDEX Industrials are associated (or correlated) with BMO NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO NASDAQ 100 has no effect on the direction of FT AlphaDEX i.e., FT AlphaDEX and BMO NASDAQ go up and down completely randomly.

Pair Corralation between FT AlphaDEX and BMO NASDAQ

Assuming the 90 days trading horizon FT AlphaDEX Industrials is expected to under-perform the BMO NASDAQ. But the etf apears to be less risky and, when comparing its historical volatility, FT AlphaDEX Industrials is 1.2 times less risky than BMO NASDAQ. The etf trades about -0.04 of its potential returns per unit of risk. The BMO NASDAQ 100 is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  9,751  in BMO NASDAQ 100 on December 2, 2024 and sell it today you would earn a total of  5.00  from holding BMO NASDAQ 100 or generate 0.05% return on investment over 90 days.

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

FT AlphaDEX Industrials  vs.  BMO NASDAQ 100

FT AlphaDEX Industrials

Risk-Adjusted Performance

Very Weak

Over the last 90 days FT AlphaDEX Industrials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

BMO NASDAQ 100

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BMO NASDAQ 100 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, BMO NASDAQ is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with FT AlphaDEX and BMO NASDAQ

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

The idea behind FT AlphaDEX Industrials and BMO NASDAQ 100 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.