Correlation Between BetaPro NASDAQ and BMO Global

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

By analyzing existing cross correlation between BetaPro NASDAQ 100 2x and BMO Global Infrastructure, you can compare the effects of market volatilities on BetaPro NASDAQ 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 BetaPro NASDAQ with a short position of BMO Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaPro NASDAQ and BMO Global.

Diversification Opportunities for BetaPro NASDAQ and BMO Global

-0.64

Correlation Coefficient

BetaPro NASDAQ  BMO Global

Excellent diversification

The 3 months correlation between BetaPro and BMO is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro NASDAQ 100 2x and BMO Global Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Global Infrastructure and BetaPro NASDAQ 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 BetaPro NASDAQ 100 2x 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 Infrastructure has no effect on the direction of BetaPro NASDAQ i.e., BetaPro NASDAQ and BMO Global go up and down completely randomly.

Pair Corralation between BetaPro NASDAQ and BMO Global

Assuming the 90 days trading horizon BetaPro NASDAQ 100 2x is expected to under-perform the BMO Global. In addition to that, BetaPro NASDAQ is 2.7 times more volatile than BMO Global Infrastructure. It trades about -0.08 of its total potential returns per unit of risk. BMO Global Infrastructure is currently generating about 0.08 per unit of volatility. If you would invest  5,096  in BMO Global Infrastructure on December 29, 2024 and sell it today you would earn a total of  260.00  from holding BMO Global Infrastructure or generate 5.1% return on investment over 90 days.

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

BetaPro NASDAQ 100 2x  vs.  BMO Global Infrastructure

BetaPro NASDAQ 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days BetaPro NASDAQ 100 2x 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 Infrastructure

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Global Infrastructure are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, BMO Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BetaPro NASDAQ and BMO Global

The main advantage of trading using opposite BetaPro NASDAQ and BMO Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BetaPro NASDAQ 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 BetaPro NASDAQ 100 2x and BMO Global Infrastructure 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.