Correlation Between Global X and BMO Government
Can any of the company-specific risk be diversified away by investing in both Global X and BMO Government 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 Government 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 Government Bond, you can compare the effects of market volatilities on Global X and BMO Government 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 Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and BMO Government.
Diversification Opportunities for Global X and BMO Government
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Global and BMO is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Global X Canadian and BMO Government Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Government Bond 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 Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Government Bond has no effect on the direction of Global X i.e., Global X and BMO Government go up and down completely randomly.
Pair Corralation between Global X and BMO Government
Assuming the 90 days trading horizon Global X Canadian is expected to generate about the same return on investment as BMO Government Bond. But, Global X Canadian is 1.05 times less risky than BMO Government. It trades about 0.05 of its potential returns per unit of risk. BMO Government Bond is currently generating about 0.04 per unit of risk. If you would invest 4,230 in BMO Government Bond on November 26, 2024 and sell it today you would earn a total of 420.00 from holding BMO Government Bond or generate 9.93% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Global X Canadian vs. BMO Government Bond
Performance |
Timeline |
Global X Canadian |
BMO Government Bond |
Global X and BMO Government Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Global X and BMO Government
The main advantage of trading using opposite Global X and BMO Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, BMO Government 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 Government will offset losses from the drop in BMO Government's long position.Global X vs. Global X Intl | ||
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BMO Government vs. BMO Mid Term IG |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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