Correlation Between BMO Growth and Global X

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

Diversification Opportunities for BMO Growth and Global X

0.98

Correlation Coefficient

BMO Growth  Global X

Almost no diversification

The 3 months correlation between BMO and Global is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding BMO Growth ETF and Global X Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Growth and BMO Growth 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 Growth ETF 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 Growth has no effect on the direction of BMO Growth i.e., BMO Growth and Global X go up and down completely randomly.

Pair Corralation between BMO Growth and Global X

Assuming the 90 days trading horizon BMO Growth is expected to generate 1.23 times less return on investment than Global X. But when comparing it to its historical volatility, BMO Growth ETF is 1.31 times less risky than Global X. It trades about 0.3 of its potential returns per unit of risk. Global X Growth is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  1,685  in Global X Growth on September 12, 2024 and sell it today you would earn a total of  163.00  from holding Global X Growth or generate 9.67% return on investment over 90 days.

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

BMO Growth ETF  vs.  Global X Growth

BMO Growth ETF

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO Growth ETF are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Global X Growth

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Growth 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 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BMO Growth and Global X

The main advantage of trading using opposite BMO Growth and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Growth 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 Growth ETF and Global X Growth 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.