Correlation Between Global X and BMO SIA
Can any of the company-specific risk be diversified away by investing in both Global X and BMO SIA 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 SIA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X SPTSX and BMO SIA Focused, you can compare the effects of market volatilities on Global X and BMO SIA 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 SIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and BMO SIA.
Diversification Opportunities for Global X and BMO SIA
Almost no diversification
The 3 months correlation between Global and BMO is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Global X SPTSX and BMO SIA Focused in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO SIA Focused 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 SPTSX are associated (or correlated) with BMO SIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO SIA Focused has no effect on the direction of Global X i.e., Global X and BMO SIA go up and down completely randomly.
Pair Corralation between Global X and BMO SIA
Assuming the 90 days trading horizon Global X SPTSX is expected to generate 0.73 times more return on investment than BMO SIA. However, Global X SPTSX is 1.38 times less risky than BMO SIA. It trades about 0.41 of its potential returns per unit of risk. BMO SIA Focused is currently generating about 0.21 per unit of risk. If you would invest 6,443 in Global X SPTSX on September 12, 2024 and sell it today you would earn a total of 248.00 from holding Global X SPTSX or generate 3.85% 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 SPTSX vs. BMO SIA Focused
Performance |
| Timeline |
| Global X SPTSX |
| BMO SIA Focused |
Global X and BMO SIA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global X and BMO SIA
The main advantage of trading using opposite Global X and BMO SIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, BMO SIA 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 SIA will offset losses from the drop in BMO SIA's long position.| Global X vs. Global X SP | Global X vs. BMO SPTSX Capped | Global X vs. Vanguard FTSE Canada | Global X vs. iShares Core SPTSX |
| BMO SIA vs. BMO SIA Focused | BMO SIA vs. BMO MSCI USA | BMO SIA vs. BMO MSCI Canada | BMO SIA vs. BMO Low Volatility |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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