Correlation Between Global X and BMO Sustainable
Can any of the company-specific risk be diversified away by investing in both Global X and BMO Sustainable 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 Sustainable into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X Active and BMO Sustainable Global, you can compare the effects of market volatilities on Global X and BMO Sustainable 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 Sustainable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and BMO Sustainable.
Diversification Opportunities for Global X and BMO Sustainable
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and BMO is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Global X Active and BMO Sustainable Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Sustainable Global 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 Active are associated (or correlated) with BMO Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Sustainable Global has no effect on the direction of Global X i.e., Global X and BMO Sustainable go up and down completely randomly.
Pair Corralation between Global X and BMO Sustainable
Assuming the 90 days trading horizon Global X Active is expected to generate 0.73 times more return on investment than BMO Sustainable. However, Global X Active is 1.36 times less risky than BMO Sustainable. It trades about 0.25 of its potential returns per unit of risk. BMO Sustainable Global is currently generating about 0.08 per unit of risk. If you would invest 705.00 in Global X Active on November 20, 2024 and sell it today you would earn a total of 12.00 from holding Global X Active or generate 1.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global X Active vs. BMO Sustainable Global
Performance |
| Timeline |
| Global X Active |
| BMO Sustainable Global |
Global X and BMO Sustainable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global X and BMO Sustainable
The main advantage of trading using opposite Global X and BMO Sustainable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, BMO Sustainable 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 Sustainable will offset losses from the drop in BMO Sustainable's long position.The idea behind Global X Active and BMO Sustainable Global pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| BMO Sustainable vs. BMO Global Strategic | BMO Sustainable vs. BMO Core Plus | BMO Sustainable vs. BMO Corporate Bond | BMO Sustainable vs. BMO Government Bond |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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