Correlation Between BMO Conservative and First Trust
Can any of the company-specific risk be diversified away by investing in both BMO Conservative and First Trust 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 Conservative and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Conservative ETF and First Trust Global, you can compare the effects of market volatilities on BMO Conservative and First Trust 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 Conservative with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Conservative and First Trust.
Diversification Opportunities for BMO Conservative and First Trust
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BMO and First is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding BMO Conservative ETF and First Trust Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Global and BMO Conservative 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 Conservative ETF are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Global has no effect on the direction of BMO Conservative i.e., BMO Conservative and First Trust go up and down completely randomly.
Pair Corralation between BMO Conservative and First Trust
Assuming the 90 days trading horizon BMO Conservative ETF is expected to generate 0.82 times more return on investment than First Trust. However, BMO Conservative ETF is 1.23 times less risky than First Trust. It trades about 0.06 of its potential returns per unit of risk. First Trust Global is currently generating about 0.01 per unit of risk. If you would invest 3,500 in BMO Conservative ETF on August 26, 2024 and sell it today you would earn a total of 14.00 from holding BMO Conservative ETF or generate 0.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Conservative ETF vs. First Trust Global
Performance |
| Timeline |
| BMO Conservative ETF |
| First Trust Global |
BMO Conservative and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Conservative and First Trust
The main advantage of trading using opposite BMO Conservative and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Conservative position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| BMO Conservative vs. First Trust Senior | BMO Conservative vs. First Trust Value | BMO Conservative vs. FT AlphaDEX Industrials | BMO Conservative vs. Global X Active |
| First Trust vs. First Trust Senior | First Trust vs. First Trust Value | First Trust vs. FT AlphaDEX Industrials | First Trust vs. Global X Active |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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