Correlation Between BMO Ultra and Global X
Can any of the company-specific risk be diversified away by investing in both BMO Ultra 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 Ultra 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 Ultra Short Term and Global X Active, you can compare the effects of market volatilities on BMO Ultra 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 Ultra with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Ultra and Global X.
Diversification Opportunities for BMO Ultra and Global X
Weak diversification
The 3 months correlation between BMO and Global is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding BMO Ultra Short Term and Global X Active in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Active and BMO Ultra 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 Ultra Short Term 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 Active has no effect on the direction of BMO Ultra i.e., BMO Ultra and Global X go up and down completely randomly.
Pair Corralation between BMO Ultra and Global X
Assuming the 90 days trading horizon BMO Ultra is expected to generate 5.74 times less return on investment than Global X. But when comparing it to its historical volatility, BMO Ultra Short Term is 14.88 times less risky than Global X. It trades about 0.65 of its potential returns per unit of risk. Global X Active is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 888.00 in Global X Active on September 1, 2024 and sell it today you would earn a total of 18.00 from holding Global X Active or generate 2.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
BMO Ultra Short Term vs. Global X Active
Performance |
| Timeline |
| BMO Ultra Short |
| Global X Active |
BMO Ultra and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Ultra and Global X
The main advantage of trading using opposite BMO Ultra and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Ultra 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 Ultra vs. BMO Short Corporate | BMO Ultra vs. BMO Short Provincial | BMO Ultra vs. BMO Long Corporate | BMO Ultra vs. BMO Real Return |
| Global X vs. BMO Covered Call | Global X vs. Forstrong Global Income | Global X vs. BMO Aggregate Bond | Global X vs. iShares Canadian HYBrid |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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