Correlation Between BMO Balanced and Global X

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

Diversification Opportunities for BMO Balanced and Global X

0.82

Correlation Coefficient

BMO Balanced  Global X

Very poor diversification

The 3 months correlation between BMO and Global is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding BMO Balanced ETF and Global X Conservative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Conservative 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 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 Conservative has no effect on the direction of BMO Balanced i.e., BMO Balanced and Global X go up and down completely randomly.

Pair Corralation between BMO Balanced and Global X

Assuming the 90 days trading horizon BMO Balanced ETF is expected to under-perform the Global X. In addition to that, BMO Balanced is 1.43 times more volatile than Global X Conservative. It trades about -0.01 of its total potential returns per unit of risk. Global X Conservative is currently generating about 0.06 per unit of volatility. If you would invest  1,378  in Global X Conservative on December 29, 2024 and sell it today you would earn a total of  17.00  from holding Global X Conservative or generate 1.23% return on investment over 90 days.

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

BMO Balanced ETF  vs.  Global X Conservative

BMO Balanced ETF

Risk-Adjusted Performance

Very 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 recent stock price disarray, may contribute to short-term losses for the investors.

Global X Conservative

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Conservative are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Global X is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BMO Balanced and Global X

The main advantage of trading using opposite BMO Balanced and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Balanced 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 Balanced ETF and Global X Conservative 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.