Correlation Between Global X and BMO Put

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

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

Diversification Opportunities for Global X and BMO Put

0.74

Correlation Coefficient

Global X  BMO Put

Poor diversification

The 3 months correlation between Global and BMO is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Global X Uranium and BMO Put Write in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Put Write 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 Uranium are associated (or correlated) with BMO Put. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Put Write has no effect on the direction of Global X i.e., Global X and BMO Put go up and down completely randomly.

Pair Corralation between Global X and BMO Put

Assuming the 90 days trading horizon Global X Uranium is expected to generate 3.8 times more return on investment than BMO Put. However, Global X is 3.8 times more volatile than BMO Put Write. It trades about 0.16 of its potential returns per unit of risk. BMO Put Write is currently generating about 0.23 per unit of risk. If you would invest  3,233  in Global X Uranium on September 12, 2024 and sell it today you would earn a total of  654.00  from holding Global X Uranium or generate 20.23% return on investment over 90 days.

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

Global X Uranium  vs.  BMO Put Write

Global X Uranium

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Uranium are ranked lower than 12 (%) 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.

BMO Put Write

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Put Write are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO Put may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Global X and BMO Put

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

The idea behind Global X Uranium and BMO Put Write 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.