Correlation Between Mackenzie Unconstrained and BMO Government
Can any of the company-specific risk be diversified away by investing in both Mackenzie Unconstrained and BMO 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 Mackenzie Unconstrained and BMO Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mackenzie Unconstrained Bond and BMO Government Bond, you can compare the effects of market volatilities on Mackenzie Unconstrained and BMO 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 Mackenzie Unconstrained with a short position of BMO Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mackenzie Unconstrained and BMO Government.
Diversification Opportunities for Mackenzie Unconstrained and BMO Government
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Mackenzie and BMO is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Mackenzie Unconstrained Bond and BMO Government Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Government Bond and Mackenzie Unconstrained 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 Mackenzie Unconstrained Bond are associated (or correlated) with BMO Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Government Bond has no effect on the direction of Mackenzie Unconstrained i.e., Mackenzie Unconstrained and BMO Government go up and down completely randomly.
Pair Corralation between Mackenzie Unconstrained and BMO Government
Assuming the 90 days trading horizon Mackenzie Unconstrained is expected to generate 1.24 times less return on investment than BMO Government. But when comparing it to its historical volatility, Mackenzie Unconstrained Bond is 1.86 times less risky than BMO Government. It trades about 0.23 of its potential returns per unit of risk. BMO Government Bond is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 4,592 in BMO Government Bond on September 1, 2024 and sell it today you would earn a total of 77.00 from holding BMO Government Bond or generate 1.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Mackenzie Unconstrained Bond vs. BMO Government Bond
Performance |
| Timeline |
| Mackenzie Unconstrained |
| BMO Government Bond |
Mackenzie Unconstrained and BMO Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mackenzie Unconstrained and BMO Government
The main advantage of trading using opposite Mackenzie Unconstrained and BMO Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mackenzie Unconstrained position performs unexpectedly, BMO 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 BMO Government will offset losses from the drop in BMO Government's long position.The idea behind Mackenzie Unconstrained Bond and BMO Government Bond 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.
| BMO Government vs. BMO Corporate Bond | BMO Government vs. BMO Short Federal | BMO Government vs. BMO Short Provincial | BMO Government vs. BMO Mid Term IG |
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.
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