Correlation Between Global X and BMO TIPS
Can any of the company-specific risk be diversified away by investing in both Global X and BMO TIPS 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 TIPS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X 7 10 and BMO TIPS Index, you can compare the effects of market volatilities on Global X and BMO TIPS 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 TIPS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and BMO TIPS.
Diversification Opportunities for Global X and BMO TIPS
Poor diversification
The 3 months correlation between Global and BMO is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Global X 7 10 and BMO TIPS Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO TIPS Index 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 7 10 are associated (or correlated) with BMO TIPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO TIPS Index has no effect on the direction of Global X i.e., Global X and BMO TIPS go up and down completely randomly.
Pair Corralation between Global X and BMO TIPS
Assuming the 90 days trading horizon Global X is expected to generate 1.77 times less return on investment than BMO TIPS. In addition to that, Global X is 1.6 times more volatile than BMO TIPS Index. It trades about 0.04 of its total potential returns per unit of risk. BMO TIPS Index is currently generating about 0.1 per unit of volatility. If you would invest 3,042 in BMO TIPS Index on November 15, 2024 and sell it today you would earn a total of 58.00 from holding BMO TIPS Index or generate 1.91% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.36% |
Values | Daily Returns |
Global X 7 10 vs. BMO TIPS Index
Performance |
Timeline |
Global X 7 |
BMO TIPS Index |
Global X and BMO TIPS Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Global X and BMO TIPS
The main advantage of trading using opposite Global X and BMO TIPS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, BMO TIPS 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 TIPS will offset losses from the drop in BMO TIPS's long position.Global X vs. Global X Canadian | ||
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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