Correlation Between BMO Balanced and Mackenzie Balanced

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

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

Diversification Opportunities for BMO Balanced and Mackenzie Balanced

0.85

Correlation Coefficient

BMO Balanced  Mackenzie Balanced

Very poor diversification

The 3 months correlation between BMO and Mackenzie is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding BMO Balanced ESG and Mackenzie Balanced Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mackenzie Balanced and BMO Balanced 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 Balanced ESG are associated (or correlated) with Mackenzie Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mackenzie Balanced has no effect on the direction of BMO Balanced i.e., BMO Balanced and Mackenzie Balanced go up and down completely randomly.

Pair Corralation between BMO Balanced and Mackenzie Balanced

Assuming the 90 days trading horizon BMO Balanced is expected to generate 2.87 times less return on investment than Mackenzie Balanced. In addition to that, BMO Balanced is 1.12 times more volatile than Mackenzie Balanced Allocation. It trades about 0.0 of its total potential returns per unit of risk. Mackenzie Balanced Allocation is currently generating about 0.01 per unit of volatility. If you would invest  2,522  in Mackenzie Balanced Allocation on December 30, 2024 and sell it today you would earn a total of  5.00  from holding Mackenzie Balanced Allocation or generate 0.2% return on investment over 90 days.

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

BMO Balanced ESG  vs.  Mackenzie Balanced Allocation

BMO Balanced ESG

Risk-Adjusted Performance

Very Weak

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

Mackenzie Balanced

Risk-Adjusted Performance

Very Weak

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

Pair Trading with BMO Balanced and Mackenzie Balanced

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

The idea behind BMO Balanced ESG and Mackenzie Balanced Allocation 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.