Correlation Between American Express and Bank of Montreal
Can any of the company-specific risk be diversified away by investing in both American Express and Bank of Montreal 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 American Express and Bank of Montreal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Bank of Montreal, you can compare the effects of market volatilities on American Express and Bank of Montreal 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 American Express with a short position of Bank of Montreal. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Bank of Montreal.
Diversification Opportunities for American Express and Bank of Montreal
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and Bank is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Bank of Montreal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Montreal and American Express 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 American Express are associated (or correlated) with Bank of Montreal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Montreal has no effect on the direction of American Express i.e., American Express and Bank of Montreal go up and down completely randomly.
Pair Corralation between American Express and Bank of Montreal
Considering the 90-day investment horizon American Express is expected to generate 0.25 times more return on investment than Bank of Montreal. However, American Express is 3.99 times less risky than Bank of Montreal. It trades about -0.31 of its potential returns per unit of risk. Bank of Montreal is currently generating about -0.22 per unit of risk. If you would invest 31,642 in American Express on November 27, 2024 and sell it today you would lose (2,102) from holding American Express or give up 6.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. Bank of Montreal
Performance |
| Timeline |
| American Express |
| Bank of Montreal |
American Express and Bank of Montreal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Bank of Montreal
The main advantage of trading using opposite American Express and Bank of Montreal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Bank of Montreal 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 Bank of Montreal will offset losses from the drop in Bank of Montreal's long position.| American Express vs. Visa Class A | American Express vs. PayPal Holdings | American Express vs. Capital One Financial | American Express vs. Upstart Holdings |
| Bank of Montreal vs. Ultimus Managers Trust | Bank of Montreal vs. American Beacon Select | Bank of Montreal vs. First Trust Indxx | Bank of Montreal vs. Direxion Daily Regional |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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