Correlation Between HSBC Holdings and Bank of Montreal
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings and Bank of Montreal 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 HSBC Holdings and Bank of Montreal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HSBC Holdings PLC and Bank of Montreal, you can compare the effects of market volatilities on HSBC Holdings and Bank of Montreal 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 HSBC Holdings with a short position of Bank of Montreal. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and Bank of Montreal.
Diversification Opportunities for HSBC Holdings and Bank of Montreal
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between HSBC and Bank is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings PLC and Bank of Montreal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Montreal and HSBC Holdings 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 HSBC Holdings PLC are associated (or correlated) with Bank of Montreal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Montreal has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and Bank of Montreal go up and down completely randomly.
Pair Corralation between HSBC Holdings and Bank of Montreal
Given the investment horizon of 90 days HSBC Holdings PLC is expected to generate 1.01 times more return on investment than Bank of Montreal. However, HSBC Holdings is 1.01 times more volatile than Bank of Montreal. It trades about 0.08 of its potential returns per unit of risk. Bank of Montreal is currently generating about 0.02 per unit of risk. If you would invest 3,194 in HSBC Holdings PLC on November 1, 2024 and sell it today you would earn a total of 2,074 from holding HSBC Holdings PLC or generate 64.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
HSBC Holdings PLC vs. Bank of Montreal
Performance |
| Timeline |
| HSBC Holdings PLC |
| Bank of Montreal |
HSBC Holdings and Bank of Montreal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC Holdings and Bank of Montreal
The main advantage of trading using opposite HSBC Holdings and Bank of Montreal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings position performs unexpectedly, Bank of Montreal 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 Bank of Montreal will offset losses from the drop in Bank of Montreal's long position.| HSBC Holdings vs. ING Group NV | HSBC Holdings vs. Natwest Group PLC | HSBC Holdings vs. Banco Santander SA | HSBC Holdings vs. UBS Group AG |
| 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 |
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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