Correlation Between BMO Equal and Global X
Can any of the company-specific risk be diversified away by investing in both BMO Equal 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 Equal 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 Equal Weight and Global X Pipelines, you can compare the effects of market volatilities on BMO Equal 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 Equal with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Equal and Global X.
Diversification Opportunities for BMO Equal and Global X
Weak diversification
The 3 months correlation between BMO and Global is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding BMO Equal Weight and Global X Pipelines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Pipelines and BMO Equal 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 Equal Weight 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 Pipelines has no effect on the direction of BMO Equal i.e., BMO Equal and Global X go up and down completely randomly.
Pair Corralation between BMO Equal and Global X
Assuming the 90 days trading horizon BMO Equal is expected to generate 2.02 times less return on investment than Global X. But when comparing it to its historical volatility, BMO Equal Weight is 1.22 times less risky than Global X. It trades about 0.14 of its potential returns per unit of risk. Global X Pipelines is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,120 in Global X Pipelines on September 1, 2024 and sell it today you would earn a total of 62.00 from holding Global X Pipelines or generate 5.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Equal Weight vs. Global X Pipelines
Performance |
| Timeline |
| BMO Equal Weight |
| Global X Pipelines |
BMO Equal and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Equal and Global X
The main advantage of trading using opposite BMO Equal and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Equal 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 Equal vs. iShares SPTSX Capped | BMO Equal vs. BMO Equal Weight | BMO Equal vs. BMO Covered Call | BMO Equal vs. BMO SPTSX Equal |
| Global X vs. Global X SPTSX | Global X vs. BMO Equal Weight | Global X vs. Global X Crude | Global X vs. Global X Natural |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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