Correlation Between BMO Balanced and CI Global

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

By analyzing existing cross correlation between BMO Balanced ETF and CI Global Asset, you can compare the effects of market volatilities on BMO Balanced and CI Global 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 Balanced with a short position of CI Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO Balanced and CI Global.

Diversification Opportunities for BMO Balanced and CI Global

0.87

Correlation Coefficient

BMO Balanced  CI Global

Very poor diversification

The 3 months correlation between BMO and CGAA is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding BMO Balanced ETF and CI Global Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Global Asset and BMO Balanced 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 Balanced ETF are associated (or correlated) with CI Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Global Asset has no effect on the direction of BMO Balanced i.e., BMO Balanced and CI Global go up and down completely randomly.

Pair Corralation between BMO Balanced and CI Global

Assuming the 90 days trading horizon BMO Balanced ETF is expected to generate 0.78 times more return on investment than CI Global. However, BMO Balanced ETF is 1.28 times less risky than CI Global. It trades about -0.01 of its potential returns per unit of risk. CI Global Asset is currently generating about -0.03 per unit of risk. If you would invest  4,028  in BMO Balanced ETF on December 29, 2024 and sell it today you would lose (15.00) from holding BMO Balanced ETF or give up 0.37% of portfolio value over 90 days.

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

BMO Balanced ETF  vs.  CI Global Asset

BMO Balanced ETF

Risk-Adjusted Performance

Weak

Over the last 90 days BMO Balanced ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, BMO Balanced is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

CI Global Asset

Risk-Adjusted Performance

Very Weak

Over the last 90 days CI Global Asset has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, CI Global is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BMO Balanced and CI Global

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

The idea behind BMO Balanced ETF and CI Global Asset 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 Transaction History module to view history of all your transactions and understand their impact on performance.