Correlation Between Bank of Montreal and Firm Capital
Can any of the company-specific risk be diversified away by investing in both Bank of Montreal and Firm Capital 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 Firm Capital 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 Firm Capital Mortgage, you can compare the effects of market volatilities on Bank of Montreal and Firm Capital 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 Firm Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Montreal and Firm Capital.
Diversification Opportunities for Bank of Montreal and Firm Capital
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and Firm is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Montreal and Firm Capital Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firm Capital Mortgage 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 Firm Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firm Capital Mortgage has no effect on the direction of Bank of Montreal i.e., Bank of Montreal and Firm Capital go up and down completely randomly.
Pair Corralation between Bank of Montreal and Firm Capital
Assuming the 90 days trading horizon Bank of Montreal is expected to generate 1.06 times more return on investment than Firm Capital. However, Bank of Montreal is 1.06 times more volatile than Firm Capital Mortgage. It trades about 0.19 of its potential returns per unit of risk. Firm Capital Mortgage is currently generating about 0.13 per unit of risk. If you would invest 12,842 in Bank of Montreal on August 29, 2024 and sell it today you would earn a total of 441.00 from holding Bank of Montreal or generate 3.43% 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. Firm Capital Mortgage
Performance |
| Timeline |
| Bank of Montreal |
| Firm Capital Mortgage |
Bank of Montreal and Firm Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Montreal and Firm Capital
The main advantage of trading using opposite Bank of Montreal and Firm Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Montreal position performs unexpectedly, Firm Capital 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 Firm Capital will offset losses from the drop in Firm Capital's long position.| Bank of Montreal vs. Royal Bank of | Bank of Montreal vs. Canadian Imperial Bank | Bank of Montreal vs. Bank of Nova | Bank of Montreal vs. Toronto Dominion Bank |
| Firm Capital vs. Senvest Capital | Firm Capital vs. Fairfax Financial Holdings | Firm Capital vs. Bank of Montreal | Firm Capital 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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