Correlation Between BMO Equal and Global X

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

Diversification Opportunities for BMO Equal and Global X

-0.58

Correlation Coefficient

BMO Equal  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 Equal Weight and Global X Robotics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Robotics and BMO Equal 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 Equal Weight 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 Robotics has no effect on the direction of BMO Equal i.e., BMO Equal and Global X go up and down completely randomly.

Pair Corralation between BMO Equal and Global X

Assuming the 90 days trading horizon BMO Equal Weight is expected to under-perform the Global X. But the etf apears to be less risky and, when comparing its historical volatility, BMO Equal Weight is 1.68 times less risky than Global X. The etf trades about -0.09 of its potential returns per unit of risk. The Global X Robotics is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,045  in Global X Robotics on September 3, 2024 and sell it today you would earn a total of  134.00  from holding Global X Robotics or generate 4.4% return on investment over 90 days.

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

BMO Equal Weight  vs.  Global X Robotics

BMO Equal Weight

Risk-Adjusted Performance

0 of 100

Very Weak

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

Global X Robotics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Robotics are ranked lower than 4 (%) 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 Equal and Global X

The main advantage of trading using opposite BMO Equal and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Equal 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 Equal Weight and Global X Robotics 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.