Correlation Between Bank of Montreal and Manulife Financial
Can any of the company-specific risk be diversified away by investing in both Bank of Montreal and Manulife Financial 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 Manulife Financial 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 Manulife Financial Corp, you can compare the effects of market volatilities on Bank of Montreal and Manulife Financial 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 Manulife Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Montreal and Manulife Financial.
Diversification Opportunities for Bank of Montreal and Manulife Financial
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and Manulife is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Montreal and Manulife Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife Financial Corp 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 Manulife Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manulife Financial Corp has no effect on the direction of Bank of Montreal i.e., Bank of Montreal and Manulife Financial go up and down completely randomly.
Pair Corralation between Bank of Montreal and Manulife Financial
Assuming the 90 days trading horizon Bank of Montreal is expected to generate 1.87 times less return on investment than Manulife Financial. But when comparing it to its historical volatility, Bank of Montreal is 1.84 times less risky than Manulife Financial. It trades about 0.3 of its potential returns per unit of risk. Manulife Financial Corp is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 4,088 in Manulife Financial Corp on September 2, 2024 and sell it today you would earn a total of 419.00 from holding Manulife Financial Corp or generate 10.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Montreal vs. Manulife Financial Corp
Performance |
| Timeline |
| Bank of Montreal |
| Manulife Financial Corp |
Bank of Montreal and Manulife Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Montreal and Manulife Financial
The main advantage of trading using opposite Bank of Montreal and Manulife Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Montreal position performs unexpectedly, Manulife Financial 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 Manulife Financial will offset losses from the drop in Manulife Financial'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 |
| Manulife Financial vs. Bank of Nova | Manulife Financial vs. Sun Life Financial | Manulife Financial vs. Toronto Dominion Bank | Manulife Financial vs. Royal 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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