Correlation Between BMO NASDAQ and Mackenzie Large

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

By analyzing existing cross correlation between BMO NASDAQ 100 and Mackenzie Large Cap, you can compare the effects of market volatilities on BMO NASDAQ and Mackenzie Large 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 NASDAQ with a short position of Mackenzie Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO NASDAQ and Mackenzie Large.

Diversification Opportunities for BMO NASDAQ and Mackenzie Large

0.95

Correlation Coefficient

BMO NASDAQ  Mackenzie Large

Almost no diversification

The 3 months correlation between BMO and Mackenzie is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding BMO NASDAQ 100 and Mackenzie Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mackenzie Large Cap and BMO NASDAQ 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 NASDAQ 100 are associated (or correlated) with Mackenzie Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mackenzie Large Cap has no effect on the direction of BMO NASDAQ i.e., BMO NASDAQ and Mackenzie Large go up and down completely randomly.

Pair Corralation between BMO NASDAQ and Mackenzie Large

Assuming the 90 days trading horizon BMO NASDAQ is expected to generate 1.26 times less return on investment than Mackenzie Large. In addition to that, BMO NASDAQ is 1.37 times more volatile than Mackenzie Large Cap. It trades about 0.17 of its total potential returns per unit of risk. Mackenzie Large Cap is currently generating about 0.3 per unit of volatility. If you would invest  21,350  in Mackenzie Large Cap on September 4, 2024 and sell it today you would earn a total of  3,189  from holding Mackenzie Large Cap or generate 14.94% return on investment over 90 days.

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

BMO NASDAQ 100  vs.  Mackenzie Large Cap

BMO NASDAQ 100

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BMO NASDAQ 100 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO NASDAQ may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mackenzie Large Cap

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mackenzie Large Cap are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Mackenzie Large displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BMO NASDAQ and Mackenzie Large

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

The idea behind BMO NASDAQ 100 and Mackenzie Large Cap 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.