Correlation Between Bank of Montreal and Great West
Can any of the company-specific risk be diversified away by investing in both Bank of Montreal and Great West 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 Great West 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 Great West Lifeco, you can compare the effects of market volatilities on Bank of Montreal and Great West 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 Great West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Montreal and Great West.
Diversification Opportunities for Bank of Montreal and Great West
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Great is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Montreal and Great West Lifeco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Lifeco 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 Great West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great West Lifeco has no effect on the direction of Bank of Montreal i.e., Bank of Montreal and Great West go up and down completely randomly.
Pair Corralation between Bank of Montreal and Great West
Assuming the 90 days trading horizon Bank of Montreal is expected to generate 0.88 times more return on investment than Great West. However, Bank of Montreal is 1.14 times less risky than Great West. It trades about 0.32 of its potential returns per unit of risk. Great West Lifeco is currently generating about -0.14 per unit of risk. If you would invest 13,955 in Bank of Montreal on November 1, 2024 and sell it today you would earn a total of 607.00 from holding Bank of Montreal or generate 4.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Bank of Montreal vs. Great West Lifeco
Performance |
| Timeline |
| Bank of Montreal |
| Great West Lifeco |
Bank of Montreal and Great West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Montreal and Great West
The main advantage of trading using opposite Bank of Montreal and Great West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Montreal position performs unexpectedly, Great West 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 Great West will offset losses from the drop in Great West'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 |
| Great West vs. Sun Life Financial | Great West vs. Power | Great West vs. Manulife Financial Corp | Great West vs. National Bank of |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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