Correlation Between BMO Aggregate and FT AlphaDEX
Can any of the company-specific risk be diversified away by investing in both BMO Aggregate and FT AlphaDEX 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 Aggregate and FT AlphaDEX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Aggregate Bond and FT AlphaDEX Industrials, you can compare the effects of market volatilities on BMO Aggregate and FT AlphaDEX 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 Aggregate with a short position of FT AlphaDEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and FT AlphaDEX.
Diversification Opportunities for BMO Aggregate and FT AlphaDEX
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BMO and FHG is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and FT AlphaDEX Industrials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT AlphaDEX Industrials and BMO Aggregate 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 Aggregate Bond are associated (or correlated) with FT AlphaDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT AlphaDEX Industrials has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and FT AlphaDEX go up and down completely randomly.
Pair Corralation between BMO Aggregate and FT AlphaDEX
Assuming the 90 days trading horizon BMO Aggregate Bond is expected to under-perform the FT AlphaDEX. But the etf apears to be less risky and, when comparing its historical volatility, BMO Aggregate Bond is 3.57 times less risky than FT AlphaDEX. The etf trades about -0.14 of its potential returns per unit of risk. The FT AlphaDEX Industrials is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 5,369 in FT AlphaDEX Industrials on August 25, 2024 and sell it today you would earn a total of 695.00 from holding FT AlphaDEX Industrials or generate 12.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Aggregate Bond vs. FT AlphaDEX Industrials
Performance |
| Timeline |
| BMO Aggregate Bond |
| FT AlphaDEX Industrials |
BMO Aggregate and FT AlphaDEX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Aggregate and FT AlphaDEX
The main advantage of trading using opposite BMO Aggregate and FT AlphaDEX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate position performs unexpectedly, FT AlphaDEX 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 FT AlphaDEX will offset losses from the drop in FT AlphaDEX's long position.| BMO Aggregate vs. Mackenzie Core Plus | BMO Aggregate vs. Mackenzie Unconstrained Bond | BMO Aggregate vs. Mackenzie Floating Rate | BMO Aggregate vs. Mackenzie Canadian Aggregate |
| FT AlphaDEX vs. iShares SPTSX Capped | FT AlphaDEX vs. BMO Equal Weight | FT AlphaDEX vs. BMO SPTSX Equal | FT AlphaDEX vs. BMO Equal Weight |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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