Correlation Between Bank of Montreal and National Bank
Can any of the company-specific risk be diversified away by investing in both Bank of Montreal and National Bank 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 National Bank 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 National Bank of, you can compare the effects of market volatilities on Bank of Montreal and National Bank 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 National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Montreal and National Bank.
Diversification Opportunities for Bank of Montreal and National Bank
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and National is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Montreal and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank has no effect on the direction of Bank of Montreal i.e., Bank of Montreal and National Bank go up and down completely randomly.
Pair Corralation between Bank of Montreal and National Bank
Assuming the 90 days trading horizon Bank of Montreal is expected to generate 1.48 times more return on investment than National Bank. However, Bank of Montreal is 1.48 times more volatile than National Bank of. It trades about 0.1 of its potential returns per unit of risk. National Bank of is currently generating about 0.07 per unit of risk. If you would invest 1,930 in Bank of Montreal on September 1, 2024 and sell it today you would earn a total of 695.00 from holding Bank of Montreal or generate 36.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.78% |
| Values | Daily Returns |
Bank of Montreal vs. National Bank of
Performance |
| Timeline |
| Bank of Montreal |
| National Bank |
Bank of Montreal and National Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Montreal and National Bank
The main advantage of trading using opposite Bank of Montreal and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Montreal position performs unexpectedly, National Bank 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 National Bank will offset losses from the drop in National Bank's long position.| Bank of Montreal vs. Tree Island Steel | Bank of Montreal vs. Eddy Smart Home | Bank of Montreal vs. HOME DEPOT CDR | Bank of Montreal vs. DIRTT Environmental Solutions |
| National Bank vs. National Bank of | National Bank vs. National Bank of | National Bank vs. National Bank of | National Bank vs. Bank of Montreal |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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