Correlation Between Bank of Montreal and CHINA BANK
Can any of the company-specific risk be diversified away by investing in both Bank of Montreal and CHINA 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 CHINA 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 CHINA BANK ADR20, you can compare the effects of market volatilities on Bank of Montreal and CHINA 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 CHINA BANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Montreal and CHINA BANK.
Diversification Opportunities for Bank of Montreal and CHINA BANK
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and CHINA is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Montreal and CHINA BANK ADR20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA BANK ADR20 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 CHINA BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA BANK ADR20 has no effect on the direction of Bank of Montreal i.e., Bank of Montreal and CHINA BANK go up and down completely randomly.
Pair Corralation between Bank of Montreal and CHINA BANK
Assuming the 90 days horizon Bank of Montreal is expected to generate 0.53 times more return on investment than CHINA BANK. However, Bank of Montreal is 1.89 times less risky than CHINA BANK. It trades about 0.33 of its potential returns per unit of risk. CHINA BANK ADR20 is currently generating about 0.06 per unit of risk. If you would invest 7,198 in Bank of Montreal on August 28, 2024 and sell it today you would earn a total of 1,838 from holding Bank of Montreal or generate 25.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Montreal vs. CHINA BANK ADR20
Performance |
| Timeline |
| Bank of Montreal |
| CHINA BANK ADR20 |
Bank of Montreal and CHINA BANK Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Montreal and CHINA BANK
The main advantage of trading using opposite Bank of Montreal and CHINA BANK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Montreal position performs unexpectedly, CHINA 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 CHINA BANK will offset losses from the drop in CHINA BANK's long position.| Bank of Montreal vs. MCEWEN MINING INC | Bank of Montreal vs. GOLD ROAD RES | Bank of Montreal vs. GALENA MINING LTD | Bank of Montreal vs. Perseus Mining Limited |
| CHINA BANK vs. AGRICULTBK HADR25 YC | CHINA BANK vs. The Toronto Dominion Bank | CHINA BANK vs. Superior Plus Corp | CHINA BANK vs. NMI Holdings |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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