Correlation Between Mackenzie Core and BMO Emerging

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

By analyzing existing cross correlation between Mackenzie Core Plus and BMO Emerging Markets, you can compare the effects of market volatilities on Mackenzie Core and BMO Emerging 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 Core with a short position of BMO Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mackenzie Core and BMO Emerging.

Diversification Opportunities for Mackenzie Core and BMO Emerging

0.83

Correlation Coefficient

Mackenzie Core  BMO Emerging

Very poor diversification

The 3 months correlation between Mackenzie and BMO is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Mackenzie Core Plus and BMO Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Emerging Markets and Mackenzie Core 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 Core Plus are associated (or correlated) with BMO Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Emerging Markets has no effect on the direction of Mackenzie Core i.e., Mackenzie Core and BMO Emerging go up and down completely randomly.

Pair Corralation between Mackenzie Core and BMO Emerging

Assuming the 90 days trading horizon Mackenzie Core is expected to generate 1.75 times less return on investment than BMO Emerging. But when comparing it to its historical volatility, Mackenzie Core Plus is 1.01 times less risky than BMO Emerging. It trades about 0.06 of its potential returns per unit of risk. BMO Emerging Markets is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,203  in BMO Emerging Markets on December 30, 2024 and sell it today you would earn a total of  28.00  from holding BMO Emerging Markets or generate 2.33% return on investment over 90 days.

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

Mackenzie Core Plus  vs.  BMO Emerging Markets

Mackenzie Core Plus

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mackenzie Core Plus are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, Mackenzie Core is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

BMO Emerging Markets

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Emerging Markets are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, BMO Emerging 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 Core and BMO Emerging

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

The idea behind Mackenzie Core Plus and BMO Emerging Markets 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.