Correlation Between First Trust and BMO Conservative
Can any of the company-specific risk be diversified away by investing in both First Trust and BMO Conservative 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 First Trust and BMO Conservative into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Senior and BMO Conservative ETF, you can compare the effects of market volatilities on First Trust and BMO Conservative 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 First Trust with a short position of BMO Conservative. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and BMO Conservative.
Diversification Opportunities for First Trust and BMO Conservative
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and BMO is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Senior and BMO Conservative ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Conservative ETF and First Trust 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 First Trust Senior are associated (or correlated) with BMO Conservative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Conservative ETF has no effect on the direction of First Trust i.e., First Trust and BMO Conservative go up and down completely randomly.
Pair Corralation between First Trust and BMO Conservative
Assuming the 90 days trading horizon First Trust is expected to generate 1.15 times less return on investment than BMO Conservative. In addition to that, First Trust is 1.55 times more volatile than BMO Conservative ETF. It trades about 0.06 of its total potential returns per unit of risk. BMO Conservative ETF is currently generating about 0.11 per unit of volatility. If you would invest 3,457 in BMO Conservative ETF on August 29, 2024 and sell it today you would earn a total of 90.00 from holding BMO Conservative ETF or generate 2.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.41% |
| Values | Daily Returns |
First Trust Senior vs. BMO Conservative ETF
Performance |
| Timeline |
| First Trust Senior |
| BMO Conservative ETF |
First Trust and BMO Conservative Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and BMO Conservative
The main advantage of trading using opposite First Trust and BMO Conservative positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, BMO Conservative 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 Conservative will offset losses from the drop in BMO Conservative's long position.| First Trust vs. First Trust Global | First Trust vs. FT AlphaDEX Industrials | First Trust vs. First Trust Value | First Trust vs. Global X Active |
| BMO Conservative vs. BMO Balanced ETF | BMO Conservative vs. BMO Growth ETF | BMO Conservative vs. iShares Core Conservative | BMO Conservative vs. Vanguard Conservative ETF |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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