Correlation Between FT AlphaDEX and BMO Floating
Can any of the company-specific risk be diversified away by investing in both FT AlphaDEX and BMO Floating 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 FT AlphaDEX and BMO Floating into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FT AlphaDEX Industrials and BMO Floating Rate, you can compare the effects of market volatilities on FT AlphaDEX and BMO Floating 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 FT AlphaDEX with a short position of BMO Floating. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT AlphaDEX and BMO Floating.
Diversification Opportunities for FT AlphaDEX and BMO Floating
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between FHG and BMO is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding FT AlphaDEX Industrials and BMO Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Floating Rate and FT AlphaDEX 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 FT AlphaDEX Industrials are associated (or correlated) with BMO Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Floating Rate has no effect on the direction of FT AlphaDEX i.e., FT AlphaDEX and BMO Floating go up and down completely randomly.
Pair Corralation between FT AlphaDEX and BMO Floating
Assuming the 90 days trading horizon FT AlphaDEX Industrials is expected to generate 2.92 times more return on investment than BMO Floating. However, FT AlphaDEX is 2.92 times more volatile than BMO Floating Rate. It trades about 0.11 of its potential returns per unit of risk. BMO Floating Rate is currently generating about 0.15 per unit of risk. If you would invest 3,768 in FT AlphaDEX Industrials on August 30, 2024 and sell it today you would earn a total of 2,367 from holding FT AlphaDEX Industrials or generate 62.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
FT AlphaDEX Industrials vs. BMO Floating Rate
Performance |
| Timeline |
| FT AlphaDEX Industrials |
| BMO Floating Rate |
FT AlphaDEX and BMO Floating Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FT AlphaDEX and BMO Floating
The main advantage of trading using opposite FT AlphaDEX and BMO Floating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FT AlphaDEX position performs unexpectedly, BMO Floating 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 BMO Floating will offset losses from the drop in BMO Floating's long position.| FT AlphaDEX vs. First Trust AlphaDEX | FT AlphaDEX vs. First Trust AlphaDEX | FT AlphaDEX vs. First Trust Senior | FT AlphaDEX vs. First Trust Value |
| BMO Floating vs. BMO Emerging Markets | BMO Floating vs. BMO Long Corporate | BMO Floating vs. BMO High Yield | BMO Floating vs. BMO Mid Corporate |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
Other Complementary Tools
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk |