Correlation Between Bank of Montreal and First Trust
Can any of the company-specific risk be diversified away by investing in both Bank of Montreal and First Trust 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 First Trust 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 First Trust Indxx, you can compare the effects of market volatilities on Bank of Montreal and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Montreal and First Trust.
Diversification Opportunities for Bank of Montreal and First Trust
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bank and First is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Montreal and First Trust Indxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Indxx 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Indxx has no effect on the direction of Bank of Montreal i.e., Bank of Montreal and First Trust go up and down completely randomly.
Pair Corralation between Bank of Montreal and First Trust
Given the investment horizon of 90 days Bank of Montreal is expected to under-perform the First Trust. In addition to that, Bank of Montreal is 2.01 times more volatile than First Trust Indxx. It trades about -0.29 of its total potential returns per unit of risk. First Trust Indxx is currently generating about 0.1 per unit of volatility. If you would invest 3,142 in First Trust Indxx on September 2, 2024 and sell it today you would earn a total of 93.00 from holding First Trust Indxx or generate 2.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Montreal vs. First Trust Indxx
Performance |
| Timeline |
| Bank of Montreal |
| First Trust Indxx |
Bank of Montreal and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Montreal and First Trust
The main advantage of trading using opposite Bank of Montreal and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Montreal position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Bank of Montreal vs. First Trust Exchange Traded | Bank of Montreal vs. Ultimus Managers Trust | Bank of Montreal vs. Horizon Kinetics Medical | Bank of Montreal vs. Harbor Health Care |
| First Trust vs. Gabelli ETFs Trust | First Trust vs. First Trust Exchange Traded | First Trust vs. First Trust Exchange Traded | First Trust vs. Northern Lights |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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