Correlation Between Global X and BMO Equal
Can any of the company-specific risk be diversified away by investing in both Global X and BMO Equal 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 Global X and BMO Equal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X Seasonal and BMO Equal Weight, you can compare the effects of market volatilities on Global X and BMO Equal 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 Global X with a short position of BMO Equal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and BMO Equal.
Diversification Opportunities for Global X and BMO Equal
Very poor diversification
The 3 months correlation between Global and BMO is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Global X Seasonal and BMO Equal Weight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Equal Weight and Global X 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 Global X Seasonal are associated (or correlated) with BMO Equal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Equal Weight has no effect on the direction of Global X i.e., Global X and BMO Equal go up and down completely randomly.
Pair Corralation between Global X and BMO Equal
Assuming the 90 days trading horizon Global X is expected to generate 1.73 times less return on investment than BMO Equal. But when comparing it to its historical volatility, Global X Seasonal is 3.3 times less risky than BMO Equal. It trades about 0.1 of its potential returns per unit of risk. BMO Equal Weight is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,771 in BMO Equal Weight on August 28, 2024 and sell it today you would earn a total of 1,233 from holding BMO Equal Weight or generate 44.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 96.96% |
| Values | Daily Returns |
Global X Seasonal vs. BMO Equal Weight
Performance |
| Timeline |
| Global X Seasonal |
| BMO Equal Weight |
Global X and BMO Equal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global X and BMO Equal
The main advantage of trading using opposite Global X and BMO Equal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, BMO Equal 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 Equal will offset losses from the drop in BMO Equal's long position.| Global X vs. Global X Active | Global X vs. Global X Active | Global X vs. Global X Active | Global X vs. Global X Active |
| BMO Equal vs. Brompton Global Dividend | BMO Equal vs. Tech Leaders Income | BMO Equal vs. Global Healthcare Income | BMO Equal vs. Brompton European Dividend |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
Other Complementary Tools
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation |