Correlation Between FT AlphaDEX and BMO Covered
Can any of the company-specific risk be diversified away by investing in both FT AlphaDEX and BMO Covered 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 Covered 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 Covered Call, you can compare the effects of market volatilities on FT AlphaDEX and BMO Covered 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 Covered. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT AlphaDEX and BMO Covered.
Diversification Opportunities for FT AlphaDEX and BMO Covered
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between FHG and BMO is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding FT AlphaDEX Industrials and BMO Covered Call in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Covered Call 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 Covered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Covered Call has no effect on the direction of FT AlphaDEX i.e., FT AlphaDEX and BMO Covered go up and down completely randomly.
Pair Corralation between FT AlphaDEX and BMO Covered
Assuming the 90 days trading horizon FT AlphaDEX Industrials is expected to under-perform the BMO Covered. In addition to that, FT AlphaDEX is 1.63 times more volatile than BMO Covered Call. It trades about -0.25 of its total potential returns per unit of risk. BMO Covered Call is currently generating about -0.26 per unit of volatility. If you would invest 1,087 in BMO Covered Call on October 9, 2024 and sell it today you would lose (31.00) from holding BMO Covered Call or give up 2.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FT AlphaDEX Industrials vs. BMO Covered Call
Performance |
| Timeline |
| FT AlphaDEX Industrials |
| BMO Covered Call |
FT AlphaDEX and BMO Covered Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FT AlphaDEX and BMO Covered
The main advantage of trading using opposite FT AlphaDEX and BMO Covered positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FT AlphaDEX position performs unexpectedly, BMO Covered 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 Covered will offset losses from the drop in BMO Covered'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 Covered vs. BMO Covered Call | BMO Covered vs. BMO Canadian High | BMO Covered vs. BMO Europe High | BMO Covered vs. Harvest Healthcare Leaders |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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