Correlation Between Global X and BMO SPTSX
Can any of the company-specific risk be diversified away by investing in both Global X and BMO SPTSX 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 SPTSX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X Natural and BMO SPTSX Equal, you can compare the effects of market volatilities on Global X and BMO SPTSX 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 SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and BMO SPTSX.
Diversification Opportunities for Global X and BMO SPTSX
Very good diversification
The 3 months correlation between Global and BMO is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Global X Natural and BMO SPTSX Equal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO SPTSX Equal 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 Natural are associated (or correlated) with BMO SPTSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO SPTSX Equal has no effect on the direction of Global X i.e., Global X and BMO SPTSX go up and down completely randomly.
Pair Corralation between Global X and BMO SPTSX
Assuming the 90 days trading horizon Global X Natural is expected to generate 8.6 times more return on investment than BMO SPTSX. However, Global X is 8.6 times more volatile than BMO SPTSX Equal. It trades about 0.27 of its potential returns per unit of risk. BMO SPTSX Equal is currently generating about 0.73 per unit of risk. If you would invest 672.00 in Global X Natural on September 2, 2024 and sell it today you would earn a total of 109.00 from holding Global X Natural or generate 16.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global X Natural vs. BMO SPTSX Equal
Performance |
| Timeline |
| Global X Natural |
| BMO SPTSX Equal |
Global X and BMO SPTSX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global X and BMO SPTSX
The main advantage of trading using opposite Global X and BMO SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, BMO SPTSX 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 SPTSX will offset losses from the drop in BMO SPTSX's long position.| Global X vs. Global X Crude | Global X vs. Global X Silver | Global X vs. Global X Gold | Global X vs. Global X Active |
| BMO SPTSX vs. BMO Canadian Dividend | BMO SPTSX vs. BMO Covered Call | BMO SPTSX vs. BMO Canadian High | BMO SPTSX vs. BMO NASDAQ 100 |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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