Correlation Between Global X and BMO Global

Can any of the company-specific risk be diversified away by investing in both Global X and BMO Global 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 Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global X Big and BMO Global Consumer, you can compare the effects of market volatilities on Global X and BMO Global 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 Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and BMO Global.

Diversification Opportunities for Global X and BMO Global

0.78

Correlation Coefficient

Global X  BMO Global

Poor diversification

The 3 months correlation between Global and BMO is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Global X Big and BMO Global Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Global Consumer 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 Big are associated (or correlated) with BMO Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Global Consumer has no effect on the direction of Global X i.e., Global X and BMO Global go up and down completely randomly.

Pair Corralation between Global X and BMO Global

Assuming the 90 days trading horizon Global X Big is expected to under-perform the BMO Global. In addition to that, Global X is 2.31 times more volatile than BMO Global Consumer. It trades about -0.09 of its total potential returns per unit of risk. BMO Global Consumer is currently generating about -0.1 per unit of volatility. If you would invest  4,332  in BMO Global Consumer on December 29, 2024 and sell it today you would lose (326.00) from holding BMO Global Consumer or give up 7.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Global X Big  vs.  BMO Global Consumer

Global X Big

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global X Big has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

BMO Global Consumer

Risk-Adjusted Performance

Very Weak

Over the last 90 days BMO Global Consumer has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with Global X and BMO Global

The main advantage of trading using opposite Global X and BMO Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, BMO Global 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 Global will offset losses from the drop in BMO Global's long position.

The idea behind Global X Big and BMO Global Consumer pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.