Correlation Between Bank of Montreal and Linamar
Can any of the company-specific risk be diversified away by investing in both Bank of Montreal and Linamar 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 Linamar 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 Linamar, you can compare the effects of market volatilities on Bank of Montreal and Linamar 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 Linamar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Montreal and Linamar.
Diversification Opportunities for Bank of Montreal and Linamar
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bank and Linamar is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Montreal and Linamar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linamar 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 Linamar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linamar has no effect on the direction of Bank of Montreal i.e., Bank of Montreal and Linamar go up and down completely randomly.
Pair Corralation between Bank of Montreal and Linamar
Assuming the 90 days trading horizon Bank of Montreal is expected to generate 2.61 times less return on investment than Linamar. But when comparing it to its historical volatility, Bank of Montreal is 4.59 times less risky than Linamar. It trades about 0.06 of its potential returns per unit of risk. Linamar is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 6,123 in Linamar on August 28, 2024 and sell it today you would earn a total of 62.00 from holding Linamar or generate 1.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Montreal vs. Linamar
Performance |
| Timeline |
| Bank of Montreal |
| Linamar |
Bank of Montreal and Linamar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Montreal and Linamar
The main advantage of trading using opposite Bank of Montreal and Linamar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Montreal position performs unexpectedly, Linamar 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 Linamar will offset losses from the drop in Linamar's long position.| Bank of Montreal vs. Canlan Ice Sports | Bank of Montreal vs. Slate Grocery REIT | Bank of Montreal vs. SPoT Coffee | Bank of Montreal vs. Brookfield Office Properties |
| Linamar vs. Martinrea International | Linamar vs. Magna International | Linamar vs. CCL Industries | Linamar vs. Stella Jones |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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