Correlation Between Global X and BMO Mid
Can any of the company-specific risk be diversified away by investing in both Global X and BMO Mid 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 Mid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X Canadian and BMO Mid Federal, you can compare the effects of market volatilities on Global X and BMO Mid 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 Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and BMO Mid.
Diversification Opportunities for Global X and BMO Mid
Very poor diversification
The 3 months correlation between Global and BMO is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Global X Canadian and BMO Mid Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Mid Federal 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 Canadian are associated (or correlated) with BMO Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Mid Federal has no effect on the direction of Global X i.e., Global X and BMO Mid go up and down completely randomly.
Pair Corralation between Global X and BMO Mid
Assuming the 90 days trading horizon Global X Canadian is expected to generate 1.11 times more return on investment than BMO Mid. However, Global X is 1.11 times more volatile than BMO Mid Federal. It trades about 0.19 of its potential returns per unit of risk. BMO Mid Federal is currently generating about 0.13 per unit of risk. If you would invest 4,847 in Global X Canadian on August 31, 2024 and sell it today you would earn a total of 103.00 from holding Global X Canadian or generate 2.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global X Canadian vs. BMO Mid Federal
Performance |
| Timeline |
| Global X Canadian |
| BMO Mid Federal |
Global X and BMO Mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global X and BMO Mid
The main advantage of trading using opposite Global X and BMO Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, BMO Mid 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 Mid will offset losses from the drop in BMO Mid's long position.| Global X vs. Global X Intl | Global X vs. Global X SP | Global X vs. BMO Discount Bond | Global X vs. Global X 7 10 |
| BMO Mid vs. BetaPro Gold Bullion | BMO Mid vs. BetaPro SP TSX | BMO Mid vs. BetaPro SPTSX Capped | BMO Mid 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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