Correlation Between Global X and BMO Balanced
Can any of the company-specific risk be diversified away by investing in both Global X and BMO Balanced 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 Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X Canadian and BMO Balanced ETF, you can compare the effects of market volatilities on Global X and BMO Balanced 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 Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and BMO Balanced.
Diversification Opportunities for Global X and BMO Balanced
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Global and BMO is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Global X Canadian and BMO Balanced ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Balanced ETF 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 Canadian are associated (or correlated) with BMO Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Balanced ETF has no effect on the direction of Global X i.e., Global X and BMO Balanced go up and down completely randomly.
Pair Corralation between Global X and BMO Balanced
Assuming the 90 days trading horizon Global X is expected to generate 1.4 times less return on investment than BMO Balanced. But when comparing it to its historical volatility, Global X Canadian is 1.02 times less risky than BMO Balanced. It trades about 0.19 of its potential returns per unit of risk. BMO Balanced ETF is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 3,014 in BMO Balanced ETF on August 31, 2024 and sell it today you would earn a total of 86.00 from holding BMO Balanced ETF or generate 2.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Global X Canadian vs. BMO Balanced ETF
Performance |
| Timeline |
| Global X Canadian |
| BMO Balanced ETF |
Global X and BMO Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global X and BMO Balanced
The main advantage of trading using opposite Global X and BMO Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, BMO Balanced 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 Balanced will offset losses from the drop in BMO Balanced's long position.| Global X vs. Global X Intl | Global X vs. Global X SP | Global X vs. BMO Discount Bond | Global X vs. Global X 7 10 |
| BMO Balanced vs. BMO Short Term Bond | BMO Balanced vs. BMO Canadian Bank | BMO Balanced vs. BMO Aggregate Bond | BMO Balanced vs. BMO Aggregate Bond |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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