Correlation Between Manulife Smart and BMO Dividend

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

By analyzing existing cross correlation between Manulife Smart Dividend and BMO Dividend ETF, you can compare the effects of market volatilities on Manulife Smart and BMO Dividend 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 Manulife Smart with a short position of BMO Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Manulife Smart and BMO Dividend.

Diversification Opportunities for Manulife Smart and BMO Dividend

0.53

Correlation Coefficient

Manulife Smart  BMO Dividend

Very weak diversification

The 3 months correlation between Manulife and BMO is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Smart Dividend and BMO Dividend ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Dividend ETF and Manulife Smart 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 Manulife Smart Dividend are associated (or correlated) with BMO Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Dividend ETF has no effect on the direction of Manulife Smart i.e., Manulife Smart and BMO Dividend go up and down completely randomly.

Pair Corralation between Manulife Smart and BMO Dividend

Assuming the 90 days trading horizon Manulife Smart Dividend is expected to under-perform the BMO Dividend. But the etf apears to be less risky and, when comparing its historical volatility, Manulife Smart Dividend is 1.02 times less risky than BMO Dividend. The etf trades about -0.05 of its potential returns per unit of risk. The BMO Dividend ETF is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  4,669  in BMO Dividend ETF on December 27, 2024 and sell it today you would lose (5.00) from holding BMO Dividend ETF or give up 0.11% of portfolio value over 90 days.

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

Manulife Smart Dividend  vs.  BMO Dividend ETF

Manulife Smart Dividend

Risk-Adjusted Performance

Very Weak

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

BMO Dividend ETF

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Manulife Smart and BMO Dividend

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

The idea behind Manulife Smart Dividend and BMO Dividend ETF 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.