Correlation Between BMO Short and Global X

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

Diversification Opportunities for BMO Short and Global X

-0.58

Correlation Coefficient

BMO Short  Global X

Excellent diversification

The 3 months correlation between BMO and Global is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding BMO Short Federal and Global X Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Gold and BMO Short 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 Short 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 Gold has no effect on the direction of BMO Short i.e., BMO Short and Global X go up and down completely randomly.

Pair Corralation between BMO Short and Global X

Assuming the 90 days trading horizon BMO Short Federal is expected to generate 0.09 times more return on investment than Global X. However, BMO Short Federal is 11.2 times less risky than Global X. It trades about 0.09 of its potential returns per unit of risk. Global X Gold is currently generating about -0.04 per unit of risk. If you would invest  2,191  in BMO Short Federal on October 5, 2024 and sell it today you would earn a total of  7.00  from holding BMO Short Federal or generate 0.32% return on investment over 90 days.

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

BMO Short Federal  vs.  Global X Gold

BMO Short Federal

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Short Federal are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BMO Short is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Global X Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X Gold has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Short and Global X

The main advantage of trading using opposite BMO Short and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Short 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 Short Federal and Global X Gold 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.