Correlation Between BMO Junior and Global X
Can any of the company-specific risk be diversified away by investing in both BMO Junior 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 Junior 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 Junior Gold and Global X Enhanced, you can compare the effects of market volatilities on BMO Junior 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 Junior with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Junior and Global X.
Diversification Opportunities for BMO Junior and Global X
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BMO and Global is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding BMO Junior Gold and Global X Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Enhanced and BMO Junior 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 Junior Gold 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 Enhanced has no effect on the direction of BMO Junior i.e., BMO Junior and Global X go up and down completely randomly.
Pair Corralation between BMO Junior and Global X
Assuming the 90 days trading horizon BMO Junior Gold is expected to generate 1.11 times more return on investment than Global X. However, BMO Junior is 1.11 times more volatile than Global X Enhanced. It trades about 0.06 of its potential returns per unit of risk. Global X Enhanced is currently generating about 0.04 per unit of risk. If you would invest 6,267 in BMO Junior Gold on August 30, 2024 and sell it today you would earn a total of 3,433 from holding BMO Junior Gold or generate 54.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Junior Gold vs. Global X Enhanced
Performance |
| Timeline |
| BMO Junior Gold |
| Global X Enhanced |
BMO Junior and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Junior and Global X
The main advantage of trading using opposite BMO Junior and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Junior 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 Junior vs. iShares SPTSX Capped | BMO Junior vs. iShares SPTSX Capped | BMO Junior vs. iShares SPTSX Capped | BMO Junior vs. iShares SPTSX Capped |
| Global X vs. iShares SPTSX Capped | Global X vs. iShares SPTSX Capped | Global X vs. iShares SPTSX Capped | Global X vs. iShares SPTSX Capped |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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