Correlation Between Mackenzie Floating and FT AlphaDEX

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

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

Diversification Opportunities for Mackenzie Floating and FT AlphaDEX

0.08

Correlation Coefficient

Mackenzie Floating  FT AlphaDEX

Significant diversification

The 3 months correlation between Mackenzie and FHG is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Mackenzie Floating Rate and FT AlphaDEX Industrials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT AlphaDEX Industrials and Mackenzie Floating 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 Mackenzie Floating Rate are associated (or correlated) with FT AlphaDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT AlphaDEX Industrials has no effect on the direction of Mackenzie Floating i.e., Mackenzie Floating and FT AlphaDEX go up and down completely randomly.

Pair Corralation between Mackenzie Floating and FT AlphaDEX

Assuming the 90 days trading horizon Mackenzie Floating Rate is expected to generate 0.12 times more return on investment than FT AlphaDEX. However, Mackenzie Floating Rate is 8.07 times less risky than FT AlphaDEX. It trades about 0.03 of its potential returns per unit of risk. FT AlphaDEX Industrials is currently generating about -0.08 per unit of risk. If you would invest  1,682  in Mackenzie Floating Rate on December 30, 2024 and sell it today you would earn a total of  4.00  from holding Mackenzie Floating Rate or generate 0.24% return on investment over 90 days.

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

Mackenzie Floating Rate  vs.  FT AlphaDEX Industrials

Mackenzie Floating Rate

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mackenzie Floating Rate are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Mackenzie Floating is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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 very healthy technical and fundamental indicators, FT AlphaDEX is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Mackenzie Floating and FT AlphaDEX

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

The idea behind Mackenzie Floating Rate and FT AlphaDEX Industrials 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.