Correlation Between BMO Junior and Global X

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

Diversification Opportunities for BMO Junior and Global X

0.97

Correlation Coefficient

BMO Junior  Global X

Almost no diversification

The 3 months correlation between BMO and Global is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding BMO Junior Gold and Global X Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Enhanced and BMO Junior 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 Junior Gold 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 Enhanced has no effect on the direction of BMO Junior i.e., BMO Junior and Global X go up and down completely randomly.

Pair Corralation between BMO Junior and Global X

Assuming the 90 days trading horizon BMO Junior is expected to generate 1.04 times less return on investment than Global X. In addition to that, BMO Junior is 1.17 times more volatile than Global X Enhanced. It trades about 0.23 of its total potential returns per unit of risk. Global X Enhanced is currently generating about 0.28 per unit of volatility. If you would invest  2,541  in Global X Enhanced on December 29, 2024 and sell it today you would earn a total of  835.00  from holding Global X Enhanced or generate 32.86% return on investment over 90 days.

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

BMO Junior Gold  vs.  Global X Enhanced

BMO Junior Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Junior Gold are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, BMO Junior displayed solid returns over the last few months and may actually be approaching a breakup point.

Global X Enhanced

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Enhanced are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Global X displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BMO Junior and Global X

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

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.