Correlation Between BMO MSCI and Global X
Can any of the company-specific risk be diversified away by investing in both BMO MSCI and Global X 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 BMO MSCI and Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BMO MSCI Europe and Global X Intl, you can compare the effects of market volatilities on BMO MSCI and Global X 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 BMO MSCI with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO MSCI and Global X.
Diversification Opportunities for BMO MSCI and Global X
Poor diversification
The 3 months correlation between BMO and Global is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding BMO MSCI Europe and Global X Intl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Intl and BMO MSCI 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 BMO MSCI Europe are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Intl has no effect on the direction of BMO MSCI i.e., BMO MSCI and Global X go up and down completely randomly.
Pair Corralation between BMO MSCI and Global X
Assuming the 90 days trading horizon BMO MSCI Europe is expected to generate 1.18 times more return on investment than Global X. However, BMO MSCI is 1.18 times more volatile than Global X Intl. It trades about -0.17 of its potential returns per unit of risk. Global X Intl is currently generating about -0.22 per unit of risk. If you would invest 3,036 in BMO MSCI Europe on October 9, 2024 and sell it today you would lose (67.00) from holding BMO MSCI Europe or give up 2.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO MSCI Europe vs. Global X Intl
Performance |
| Timeline |
| BMO MSCI Europe |
| Global X Intl |
BMO MSCI and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO MSCI and Global X
The main advantage of trading using opposite BMO MSCI and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO MSCI position performs unexpectedly, Global X 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 Global X will offset losses from the drop in Global X's long position.| BMO MSCI vs. Global X Intl | BMO MSCI vs. Global X Canadian | BMO MSCI vs. Global X SPTSX | BMO MSCI vs. Global X Canadian |
| Global X vs. Global X Canadian | Global X vs. Global X SP | Global X vs. Global X Europe | Global X vs. Global X Emerging |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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