Correlation Between BMO Monthly and Mackenzie Balanced

Can any of the company-specific risk be diversified away by investing in both BMO Monthly 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 Monthly 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 Monthly Income and Mackenzie Balanced Allocation, you can compare the effects of market volatilities on BMO Monthly 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 Monthly with a short position of Mackenzie Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Monthly and Mackenzie Balanced.

Diversification Opportunities for BMO Monthly and Mackenzie Balanced

0.96

Correlation Coefficient

BMO Monthly  Mackenzie Balanced

Almost no diversification

The 3 months correlation between BMO and Mackenzie is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding BMO Monthly Income 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 Monthly 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 Monthly Income 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 Monthly i.e., BMO Monthly and Mackenzie Balanced go up and down completely randomly.

Pair Corralation between BMO Monthly and Mackenzie Balanced

Assuming the 90 days trading horizon BMO Monthly is expected to generate 1.18 times less return on investment than Mackenzie Balanced. But when comparing it to its historical volatility, BMO Monthly Income is 1.59 times less risky than Mackenzie Balanced. It trades about 0.19 of its potential returns per unit of risk. Mackenzie Balanced Allocation is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,144  in Mackenzie Balanced Allocation on September 5, 2024 and sell it today you would earn a total of  437.00  from holding Mackenzie Balanced Allocation or generate 20.38% return on investment over 90 days.

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

BMO Monthly Income  vs.  Mackenzie Balanced Allocation

BMO Monthly Income

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Monthly Income are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, BMO Monthly 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

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mackenzie Balanced Allocation are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Mackenzie Balanced may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BMO Monthly and Mackenzie Balanced

The main advantage of trading using opposite BMO Monthly and Mackenzie Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Monthly 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 Monthly Income 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.