Correlation Between Mackenzie Canadian and BMO SPTSX

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

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

Diversification Opportunities for Mackenzie Canadian and BMO SPTSX

0.99

Correlation Coefficient

Mackenzie Canadian  BMO SPTSX

No risk reduction

The 3 months correlation between Mackenzie and BMO is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Mackenzie Canadian Equity and BMO SPTSX Capped in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO SPTSX Capped and Mackenzie Canadian 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 Canadian Equity are associated (or correlated) with BMO SPTSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO SPTSX Capped has no effect on the direction of Mackenzie Canadian i.e., Mackenzie Canadian and BMO SPTSX go up and down completely randomly.

Pair Corralation between Mackenzie Canadian and BMO SPTSX

Assuming the 90 days trading horizon Mackenzie Canadian Equity is expected to under-perform the BMO SPTSX. But the etf apears to be less risky and, when comparing its historical volatility, Mackenzie Canadian Equity is 1.13 times less risky than BMO SPTSX. The etf trades about -0.06 of its potential returns per unit of risk. The BMO SPTSX Capped is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  3,422  in BMO SPTSX Capped on December 2, 2024 and sell it today you would lose (18.00) from holding BMO SPTSX Capped or give up 0.53% of portfolio value over 90 days.

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

Mackenzie Canadian Equity  vs.  BMO SPTSX Capped

Mackenzie Canadian Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mackenzie Canadian Equity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Mackenzie Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

BMO SPTSX Capped

Risk-Adjusted Performance

Very Weak

Over the last 90 days BMO SPTSX Capped has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, BMO SPTSX 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 Canadian and BMO SPTSX

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

The idea behind Mackenzie Canadian Equity and BMO SPTSX Capped 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.