Correlation Between Bank of Montreal and Fairfax Financial
Can any of the company-specific risk be diversified away by investing in both Bank of Montreal and Fairfax Financial 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 Fairfax Financial 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 Fairfax Financial Holdings, you can compare the effects of market volatilities on Bank of Montreal and Fairfax Financial 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 Fairfax Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Montreal and Fairfax Financial.
Diversification Opportunities for Bank of Montreal and Fairfax Financial
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and Fairfax is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Montreal and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial 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 Fairfax Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairfax Financial has no effect on the direction of Bank of Montreal i.e., Bank of Montreal and Fairfax Financial go up and down completely randomly.
Pair Corralation between Bank of Montreal and Fairfax Financial
Assuming the 90 days trading horizon Bank of Montreal is expected to generate 38.81 times less return on investment than Fairfax Financial. But when comparing it to its historical volatility, Bank of Montreal is 5.18 times less risky than Fairfax Financial. It trades about 0.04 of its potential returns per unit of risk. Fairfax Financial Holdings is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 2,228 in Fairfax Financial Holdings on September 2, 2024 and sell it today you would earn a total of 172.00 from holding Fairfax Financial Holdings or generate 7.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Montreal vs. Fairfax Financial Holdings
Performance |
| Timeline |
| Bank of Montreal |
| Fairfax Financial |
Bank of Montreal and Fairfax Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Montreal and Fairfax Financial
The main advantage of trading using opposite Bank of Montreal and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Montreal position performs unexpectedly, Fairfax Financial 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 Fairfax Financial will offset losses from the drop in Fairfax Financial's long position.| Bank of Montreal vs. Richelieu Hardware | Bank of Montreal vs. Upstart Investments | Bank of Montreal vs. Westshore Terminals Investment | Bank of Montreal vs. Converge Technology Solutions |
| Fairfax Financial vs. Endeavour Silver Corp | Fairfax Financial vs. Monument Mining Limited | Fairfax Financial vs. TGS Esports | Fairfax Financial vs. Perseus Mining |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
Other Complementary Tools
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories |