Correlation Between Mackenzie Unconstrained and BMO Mid

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

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

Diversification Opportunities for Mackenzie Unconstrained and BMO Mid

0.73

Correlation Coefficient

Mackenzie Unconstrained  BMO Mid

Poor diversification

The 3 months correlation between Mackenzie and BMO is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Mackenzie Unconstrained Bond and BMO Mid Term IG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Mid Term and Mackenzie Unconstrained 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 Unconstrained Bond are associated (or correlated) with BMO Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Mid Term has no effect on the direction of Mackenzie Unconstrained i.e., Mackenzie Unconstrained and BMO Mid go up and down completely randomly.

Pair Corralation between Mackenzie Unconstrained and BMO Mid

Assuming the 90 days trading horizon Mackenzie Unconstrained is expected to generate 3.39 times less return on investment than BMO Mid. But when comparing it to its historical volatility, Mackenzie Unconstrained Bond is 1.19 times less risky than BMO Mid. It trades about 0.06 of its potential returns per unit of risk. BMO Mid Term IG is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,794  in BMO Mid Term IG on September 12, 2024 and sell it today you would earn a total of  61.00  from holding BMO Mid Term IG or generate 3.4% return on investment over 90 days.

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

Mackenzie Unconstrained Bond  vs.  BMO Mid Term IG

Mackenzie Unconstrained

Risk-Adjusted Performance

4 of 100

Insignificant

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

BMO Mid Term

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Mid Term IG are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, BMO Mid 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 Unconstrained and BMO Mid

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

The idea behind Mackenzie Unconstrained Bond and BMO Mid Term IG 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.