Correlation Between BMO NASDAQ and Mackenzie Core

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

Diversification Opportunities for BMO NASDAQ and Mackenzie Core

-0.33

Correlation Coefficient

BMO NASDAQ  Mackenzie Core

Very good diversification

The 3 months correlation between BMO and Mackenzie is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding BMO NASDAQ 100 and Mackenzie Core Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mackenzie Core Plus 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 Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mackenzie Core Plus has no effect on the direction of BMO NASDAQ i.e., BMO NASDAQ and Mackenzie Core go up and down completely randomly.

Pair Corralation between BMO NASDAQ and Mackenzie Core

Assuming the 90 days trading horizon BMO NASDAQ 100 is expected to generate 2.52 times more return on investment than Mackenzie Core. However, BMO NASDAQ is 2.52 times more volatile than Mackenzie Core Plus. It trades about 0.26 of its potential returns per unit of risk. Mackenzie Core Plus is currently generating about 0.0 per unit of risk. If you would invest  8,582  in BMO NASDAQ 100 on September 13, 2024 and sell it today you would earn a total of  1,405  from holding BMO NASDAQ 100 or generate 16.37% return on investment over 90 days.

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

BMO NASDAQ 100  vs.  Mackenzie Core Plus

BMO NASDAQ 100

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO NASDAQ 100 are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO NASDAQ displayed solid returns over the last few months and may actually be approaching a breakup point.

Mackenzie Core Plus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mackenzie Core Plus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, Mackenzie Core 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 NASDAQ and Mackenzie Core

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

The idea behind BMO NASDAQ 100 and Mackenzie Core Plus 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.