Correlation Between BMO Equal and FT AlphaDEX
Can any of the company-specific risk be diversified away by investing in both BMO Equal 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 Equal 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 Equal Weight and FT AlphaDEX Industrials, you can compare the effects of market volatilities on BMO Equal 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 Equal with a short position of FT AlphaDEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Equal and FT AlphaDEX.
Diversification Opportunities for BMO Equal and FT AlphaDEX
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BMO and FHG is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding BMO Equal Weight 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 Equal 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 Equal Weight 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 Equal i.e., BMO Equal and FT AlphaDEX go up and down completely randomly.
Pair Corralation between BMO Equal and FT AlphaDEX
Assuming the 90 days trading horizon BMO Equal is expected to generate 2.06 times less return on investment than FT AlphaDEX. In addition to that, BMO Equal is 1.07 times more volatile than FT AlphaDEX Industrials. It trades about 0.07 of its total potential returns per unit of risk. FT AlphaDEX Industrials is currently generating about 0.15 per unit of volatility. If you would invest 4,093 in FT AlphaDEX Industrials on August 29, 2024 and sell it today you would earn a total of 2,042 from holding FT AlphaDEX Industrials or generate 49.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Equal Weight vs. FT AlphaDEX Industrials
Performance |
| Timeline |
| BMO Equal Weight |
| FT AlphaDEX Industrials |
BMO Equal and FT AlphaDEX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Equal and FT AlphaDEX
The main advantage of trading using opposite BMO Equal and FT AlphaDEX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Equal 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 Equal vs. iShares SPTSX Capped | BMO Equal vs. Vanguard FTSE Canadian | BMO Equal vs. BMO Equal Weight | BMO Equal vs. BMO Canadian Dividend |
| FT AlphaDEX vs. First Trust AlphaDEX | FT AlphaDEX vs. First Trust AlphaDEX | FT AlphaDEX vs. First Trust Senior | FT AlphaDEX vs. First Trust Value |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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