Correlation Between BMO Long and Pacer Funds
Can any of the company-specific risk be diversified away by investing in both BMO Long and Pacer Funds 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 Long and Pacer Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO Long Federal and Pacer Funds Trust, you can compare the effects of market volatilities on BMO Long and Pacer Funds 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 Long with a short position of Pacer Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Long and Pacer Funds.
Diversification Opportunities for BMO Long and Pacer Funds
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BMO and Pacer is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding BMO Long Federal and Pacer Funds Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Funds Trust and BMO Long 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 Long Federal are associated (or correlated) with Pacer Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Funds Trust has no effect on the direction of BMO Long i.e., BMO Long and Pacer Funds go up and down completely randomly.
Pair Corralation between BMO Long and Pacer Funds
Assuming the 90 days trading horizon BMO Long is expected to generate 1.57 times less return on investment than Pacer Funds. But when comparing it to its historical volatility, BMO Long Federal is 1.11 times less risky than Pacer Funds. It trades about 0.08 of its potential returns per unit of risk. Pacer Funds Trust is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,083 in Pacer Funds Trust on August 30, 2024 and sell it today you would earn a total of 49.00 from holding Pacer Funds Trust or generate 2.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
BMO Long Federal vs. Pacer Funds Trust
Performance |
| Timeline |
| BMO Long Federal |
| Pacer Funds Trust |
BMO Long and Pacer Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Long and Pacer Funds
The main advantage of trading using opposite BMO Long and Pacer Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Long position performs unexpectedly, Pacer Funds 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 Pacer Funds will offset losses from the drop in Pacer Funds' long position.| BMO Long vs. iShares MSCI Emerging | BMO Long vs. iShares MSCI Global | BMO Long vs. iShares Core Canadian | BMO Long vs. Vanguard Total Market |
| Pacer Funds vs. Invesco Actively Managed | Pacer Funds vs. iShares Trust | Pacer Funds vs. Xtrackers MSCI Emerging | Pacer Funds vs. iShares MSCI Emerging |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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