Correlation Between BMO SPTSX and Mackenzie Government

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

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

Diversification Opportunities for BMO SPTSX and Mackenzie Government

-0.35

Correlation Coefficient

BMO SPTSX  Mackenzie Government

Very good diversification

The 3 months correlation between BMO and Mackenzie is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding BMO SPTSX Equal and Mackenzie Government Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mackenzie Government Long and BMO SPTSX 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 SPTSX Equal are associated (or correlated) with Mackenzie Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mackenzie Government Long has no effect on the direction of BMO SPTSX i.e., BMO SPTSX and Mackenzie Government go up and down completely randomly.

Pair Corralation between BMO SPTSX and Mackenzie Government

Assuming the 90 days trading horizon BMO SPTSX Equal is expected to generate 0.6 times more return on investment than Mackenzie Government. However, BMO SPTSX Equal is 1.66 times less risky than Mackenzie Government. It trades about 0.3 of its potential returns per unit of risk. Mackenzie Government Long is currently generating about -0.07 per unit of risk. If you would invest  3,974  in BMO SPTSX Equal on September 14, 2024 and sell it today you would earn a total of  324.00  from holding BMO SPTSX Equal or generate 8.15% return on investment over 90 days.

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

BMO SPTSX Equal  vs.  Mackenzie Government Long

BMO SPTSX Equal

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO SPTSX Equal are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, BMO SPTSX may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mackenzie Government Long

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind BMO SPTSX Equal and Mackenzie Government Long 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.