Correlation Between Global X and BMO MSCI
Can any of the company-specific risk be diversified away by investing in both Global X and BMO MSCI 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 MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X Emerging and BMO MSCI Emerging, you can compare the effects of market volatilities on Global X and BMO MSCI 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 MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and BMO MSCI.
Diversification Opportunities for Global X and BMO MSCI
No risk reduction
The 3 months correlation between Global and BMO is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Global X Emerging and BMO MSCI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO MSCI Emerging 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 Emerging are associated (or correlated) with BMO MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO MSCI Emerging has no effect on the direction of Global X i.e., Global X and BMO MSCI go up and down completely randomly.
Pair Corralation between Global X and BMO MSCI
Assuming the 90 days trading horizon Global X is expected to generate 1.23 times less return on investment than BMO MSCI. But when comparing it to its historical volatility, Global X Emerging is 1.04 times less risky than BMO MSCI. It trades about 0.05 of its potential returns per unit of risk. BMO MSCI Emerging is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,118 in BMO MSCI Emerging on August 29, 2024 and sell it today you would earn a total of 82.00 from holding BMO MSCI Emerging or generate 3.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global X Emerging vs. BMO MSCI Emerging
Performance |
| Timeline |
| Global X Emerging |
| BMO MSCI Emerging |
Global X and BMO MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global X and BMO MSCI
The main advantage of trading using opposite Global X and BMO MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, BMO MSCI 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 MSCI will offset losses from the drop in BMO MSCI's long position.| Global X vs. Global X Intl | Global X vs. Global X Europe | Global X vs. Global X Large | Global X vs. Global X SPTSX |
| BMO MSCI vs. BMO MSCI EAFE | BMO MSCI vs. BMO MSCI China | BMO MSCI vs. BMO MSCI EAFE | BMO MSCI vs. BMO MSCI India |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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