Correlation Between Bank of Montreal and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both Bank of Montreal and Wells Fargo 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 Wells Fargo 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 Wells Fargo, you can compare the effects of market volatilities on Bank of Montreal and Wells Fargo 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 Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Montreal and Wells Fargo.
Diversification Opportunities for Bank of Montreal and Wells Fargo
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Wells is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Montreal and Wells Fargo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo 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 Wells Fargo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wells Fargo has no effect on the direction of Bank of Montreal i.e., Bank of Montreal and Wells Fargo go up and down completely randomly.
Pair Corralation between Bank of Montreal and Wells Fargo
Considering the 90-day investment horizon Bank of Montreal is expected to generate 5.03 times less return on investment than Wells Fargo. But when comparing it to its historical volatility, Bank of Montreal is 4.12 times less risky than Wells Fargo. It trades about 0.21 of its potential returns per unit of risk. Wells Fargo is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 6,416 in Wells Fargo on August 26, 2024 and sell it today you would earn a total of 1,180 from holding Wells Fargo or generate 18.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Montreal vs. Wells Fargo
Performance |
| Timeline |
| Bank of Montreal |
| Wells Fargo |
Bank of Montreal and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Montreal and Wells Fargo
The main advantage of trading using opposite Bank of Montreal and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Montreal position performs unexpectedly, Wells Fargo 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 Wells Fargo will offset losses from the drop in Wells Fargo's long position.| Bank of Montreal vs. Canadian Imperial Bank | Bank of Montreal vs. Toronto Dominion Bank | Bank of Montreal vs. Royal Bank of | Bank of Montreal vs. Citigroup |
| Wells Fargo vs. Toronto Dominion Bank | Wells Fargo vs. Nu Holdings | Wells Fargo vs. HSBC Holdings PLC | Wells Fargo 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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