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
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bank and National is 0.35. 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 3.88 times less return on investment than National Bank. But when comparing it to its historical volatility, Bank of Montreal is 8.08 times less risky than National Bank. It trades about 0.4 of its potential returns per unit of risk. National Bank of is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 2,455 in National Bank of on August 29, 2024 and sell it today you would earn a total of 32.00 from holding National Bank of or generate 1.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| 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. Walmart Inc CDR | Bank of Montreal vs. Amazon CDR | Bank of Montreal vs. Berkshire Hathaway CDR | Bank of Montreal vs. UnitedHealth Group CDR |
| 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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