Correlation Between BMO Aggregate and Global X
Can any of the company-specific risk be diversified away by investing in both BMO Aggregate 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 Aggregate 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 Aggregate Bond and Global X Canadian, you can compare the effects of market volatilities on BMO Aggregate 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 Aggregate with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Aggregate and Global X.
Diversification Opportunities for BMO Aggregate and Global X
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between BMO and Global is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding BMO Aggregate Bond and Global X Canadian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Canadian and BMO Aggregate 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 Aggregate Bond 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 Canadian has no effect on the direction of BMO Aggregate i.e., BMO Aggregate and Global X go up and down completely randomly.
Pair Corralation between BMO Aggregate and Global X
Assuming the 90 days trading horizon BMO Aggregate is expected to generate 1.13 times less return on investment than Global X. But when comparing it to its historical volatility, BMO Aggregate Bond is 1.14 times less risky than Global X. It trades about 0.17 of its potential returns per unit of risk. Global X Canadian is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 4,863 in Global X Canadian on September 1, 2024 and sell it today you would earn a total of 87.00 from holding Global X Canadian or generate 1.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BMO Aggregate Bond vs. Global X Canadian
Performance |
| Timeline |
| BMO Aggregate Bond |
| Global X Canadian |
BMO Aggregate and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BMO Aggregate and Global X
The main advantage of trading using opposite BMO Aggregate and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Aggregate 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.| BMO Aggregate vs. iShares Core MSCI | BMO Aggregate vs. Vanguard FTSE Canada | BMO Aggregate vs. Vanguard Canadian Aggregate | BMO Aggregate vs. iShares Core MSCI |
| 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 |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
Other Complementary Tools
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |