Correlation Between BMO Long and Global X

Can any of the company-specific risk be diversified away by investing in both BMO Long 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 Long 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 Long Federal and Global X Active, you can compare the effects of market volatilities on BMO Long 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 Long with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Long and Global X.

Diversification Opportunities for BMO Long and Global X

-0.18

Correlation Coefficient

BMO Long  Global X

Good diversification

The 3 months correlation between BMO and Global is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding BMO Long Federal 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 Long 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 Long Federal 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 Long i.e., BMO Long and Global X go up and down completely randomly.

Pair Corralation between BMO Long and Global X

Assuming the 90 days trading horizon BMO Long Federal is expected to under-perform the Global X. In addition to that, BMO Long is 10.34 times more volatile than Global X Active. It trades about -0.03 of its total potential returns per unit of risk. Global X Active is currently generating about 0.21 per unit of volatility. If you would invest  1,006  in Global X Active on October 23, 2024 and sell it today you would earn a total of  3.00  from holding Global X Active or generate 0.3% return on investment over 90 days.

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

BMO Long Federal  vs.  Global X Active

BMO Long Federal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BMO Long Federal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, BMO Long is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Global X Active

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Active are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Global X is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BMO Long and Global X

The main advantage of trading using opposite BMO Long and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Long 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.

The idea behind BMO Long Federal and Global X Active 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.