Correlation Between Global X and BMO Junior

Can any of the company-specific risk be diversified away by investing in both Global X and BMO Junior 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 Junior into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global X Natural and BMO Junior Gold, you can compare the effects of market volatilities on Global X and BMO Junior 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 Junior. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and BMO Junior.

Diversification Opportunities for Global X and BMO Junior

-0.2

Correlation Coefficient

Global X  BMO Junior

Good diversification

The 3 months correlation between Global and BMO is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Global X Natural and BMO Junior Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Junior Gold 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 Natural are associated (or correlated) with BMO Junior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Junior Gold has no effect on the direction of Global X i.e., Global X and BMO Junior go up and down completely randomly.

Pair Corralation between Global X and BMO Junior

Assuming the 90 days trading horizon Global X is expected to generate 1.14 times less return on investment than BMO Junior. In addition to that, Global X is 1.23 times more volatile than BMO Junior Gold. It trades about 0.04 of its total potential returns per unit of risk. BMO Junior Gold is currently generating about 0.06 per unit of volatility. If you would invest  9,474  in BMO Junior Gold on September 12, 2024 and sell it today you would earn a total of  546.00  from holding BMO Junior Gold or generate 5.76% return on investment over 90 days.

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

Global X Natural  vs.  BMO Junior Gold

Global X Natural

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Natural are ranked lower than 3 (%) 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.

BMO Junior Gold

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Junior Gold are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, BMO Junior may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Global X and BMO Junior

The main advantage of trading using opposite Global X and BMO Junior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, BMO Junior 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 Junior will offset losses from the drop in BMO Junior's long position.

The idea behind Global X Natural and BMO Junior 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.