Correlation Between Bank of Montreal and Industrial
Can any of the company-specific risk be diversified away by investing in both Bank of Montreal and Industrial 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 Industrial 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 Industrial and Commercial, you can compare the effects of market volatilities on Bank of Montreal and Industrial 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 Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Montreal and Industrial.
Diversification Opportunities for Bank of Montreal and Industrial
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Industrial is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Montreal and Industrial and Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial and Commercial 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 Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial and Commercial has no effect on the direction of Bank of Montreal i.e., Bank of Montreal and Industrial go up and down completely randomly.
Pair Corralation between Bank of Montreal and Industrial
Assuming the 90 days horizon Bank of Montreal is expected to generate 0.43 times more return on investment than Industrial. However, Bank of Montreal is 2.34 times less risky than Industrial. It trades about 0.28 of its potential returns per unit of risk. Industrial and Commercial is currently generating about -0.02 per unit of risk. If you would invest 8,421 in Bank of Montreal on August 28, 2024 and sell it today you would earn a total of 615.00 from holding Bank of Montreal or generate 7.3% 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. Industrial and Commercial
Performance |
| Timeline |
| Bank of Montreal |
| Industrial and Commercial |
Bank of Montreal and Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Montreal and Industrial
The main advantage of trading using opposite Bank of Montreal and Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Montreal position performs unexpectedly, Industrial 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 Industrial will offset losses from the drop in Industrial'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 |
| Industrial vs. Coor Service Management | Industrial vs. SIDETRADE EO 1 | Industrial vs. Globe Trade Centre | Industrial vs. FAST RETAIL ADR |
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 CEOs Directory module to screen CEOs from public companies around the world.
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