Correlation Between BMO Short and Mackenzie Canadian

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

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

Diversification Opportunities for BMO Short and Mackenzie Canadian

0.67

Correlation Coefficient

BMO Short  Mackenzie Canadian

Poor diversification

The 3 months correlation between BMO and Mackenzie is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding BMO Short Corporate and Mackenzie Canadian Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mackenzie Canadian Equity and BMO Short 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 BMO Short Corporate are associated (or correlated) with Mackenzie Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mackenzie Canadian Equity has no effect on the direction of BMO Short i.e., BMO Short and Mackenzie Canadian go up and down completely randomly.

Pair Corralation between BMO Short and Mackenzie Canadian

Assuming the 90 days trading horizon BMO Short is expected to generate 7.57 times less return on investment than Mackenzie Canadian. But when comparing it to its historical volatility, BMO Short Corporate is 3.48 times less risky than Mackenzie Canadian. It trades about 0.16 of its potential returns per unit of risk. Mackenzie Canadian Equity is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  13,981  in Mackenzie Canadian Equity on September 4, 2024 and sell it today you would earn a total of  1,649  from holding Mackenzie Canadian Equity or generate 11.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

BMO Short Corporate  vs.  Mackenzie Canadian Equity

BMO Short Corporate

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Short Corporate are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, BMO Short is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Mackenzie Canadian Equity

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Mackenzie Canadian Equity are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Mackenzie Canadian may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BMO Short and Mackenzie Canadian

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

The idea behind BMO Short Corporate and Mackenzie Canadian Equity 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.