Correlation Between Mackenzie Emerging and Mackenzie Government

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

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

Diversification Opportunities for Mackenzie Emerging and Mackenzie Government

0.09

Correlation Coefficient

Mackenzie Emerging  Mackenzie Government

Significant diversification

The 3 months correlation between Mackenzie and Mackenzie is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Mackenzie Emerging Markets and Mackenzie Government Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mackenzie Government Long and Mackenzie Emerging 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 Emerging Markets are associated (or correlated) with Mackenzie Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mackenzie Government Long has no effect on the direction of Mackenzie Emerging i.e., Mackenzie Emerging and Mackenzie Government go up and down completely randomly.

Pair Corralation between Mackenzie Emerging and Mackenzie Government

Assuming the 90 days trading horizon Mackenzie Emerging is expected to generate 1.17 times less return on investment than Mackenzie Government. But when comparing it to its historical volatility, Mackenzie Emerging Markets is 1.29 times less risky than Mackenzie Government. It trades about 0.04 of its potential returns per unit of risk. Mackenzie Government Long is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  10,432  in Mackenzie Government Long on September 3, 2024 and sell it today you would earn a total of  172.00  from holding Mackenzie Government Long or generate 1.65% return on investment over 90 days.

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

Mackenzie Emerging Markets  vs.  Mackenzie Government Long

Mackenzie Emerging

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mackenzie Emerging Markets are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Mackenzie Emerging is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Mackenzie Government Long

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mackenzie Government Long are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Mackenzie Government 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 Emerging and Mackenzie Government

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

The idea behind Mackenzie Emerging Markets and Mackenzie Government Long 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.