Correlation Between Bank of Montreal and BCE
Can any of the company-specific risk be diversified away by investing in both Bank of Montreal and BCE 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 Bank of Montreal and BCE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of Montreal and BCE Inc Pref, you can compare the effects of market volatilities on Bank of Montreal and BCE 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 Bank of Montreal with a short position of BCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Montreal and BCE.
Diversification Opportunities for Bank of Montreal and BCE
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bank and BCE is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Montreal and BCE Inc Pref in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCE Inc Pref and Bank of Montreal 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 Bank of Montreal are associated (or correlated) with BCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCE Inc Pref has no effect on the direction of Bank of Montreal i.e., Bank of Montreal and BCE go up and down completely randomly.
Pair Corralation between Bank of Montreal and BCE
Assuming the 90 days trading horizon Bank of Montreal is expected to generate 1.18 times more return on investment than BCE. However, Bank of Montreal is 1.18 times more volatile than BCE Inc Pref. It trades about 0.11 of its potential returns per unit of risk. BCE Inc Pref is currently generating about 0.02 per unit of risk. If you would invest 1,791 in Bank of Montreal on September 14, 2024 and sell it today you would earn a total of 822.00 from holding Bank of Montreal or generate 45.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Montreal vs. BCE Inc Pref
Performance |
| Timeline |
| Bank of Montreal |
| BCE Inc Pref |
Bank of Montreal and BCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Montreal and BCE
The main advantage of trading using opposite Bank of Montreal and BCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Montreal position performs unexpectedly, BCE 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 BCE will offset losses from the drop in BCE's long position.| Bank of Montreal vs. Western Investment | Bank of Montreal vs. Verizon Communications CDR | Bank of Montreal vs. Globex Mining Enterprises | Bank of Montreal vs. Data Communications Management |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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