Correlation Between BMO Short and Mackenzie High

Can any of the company-specific risk be diversified away by investing in both BMO Short and Mackenzie High 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 High 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 High Yield, you can compare the effects of market volatilities on BMO Short and Mackenzie High 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 High. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Short and Mackenzie High.

Diversification Opportunities for BMO Short and Mackenzie High

0.74

Correlation Coefficient

BMO Short  Mackenzie High

Poor diversification

The 3 months correlation between BMO and Mackenzie is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding BMO Short Corporate and Mackenzie High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mackenzie High Yield 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 High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mackenzie High Yield has no effect on the direction of BMO Short i.e., BMO Short and Mackenzie High go up and down completely randomly.

Pair Corralation between BMO Short and Mackenzie High

Assuming the 90 days trading horizon BMO Short Corporate is expected to generate 0.37 times more return on investment than Mackenzie High. However, BMO Short Corporate is 2.69 times less risky than Mackenzie High. It trades about 0.07 of its potential returns per unit of risk. Mackenzie High Yield is currently generating about 0.0 per unit of risk. If you would invest  1,381  in BMO Short Corporate on September 27, 2024 and sell it today you would earn a total of  9.00  from holding BMO Short Corporate or generate 0.65% return on investment over 90 days.

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

BMO Short Corporate  vs.  Mackenzie High Yield

BMO Short Corporate

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Short Corporate are ranked lower than 5 (%) 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 High Yield

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Mackenzie High Yield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Mackenzie High 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 Short and Mackenzie High

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

The idea behind BMO Short Corporate and Mackenzie High Yield 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.