Correlation Between First Trust and Bank of Montreal
Can any of the company-specific risk be diversified away by investing in both First Trust 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 First Trust 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 First Trust Exchange Traded and Bank of Montreal, you can compare the effects of market volatilities on First Trust 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 First Trust with a short position of Bank of Montreal. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Bank of Montreal.
Diversification Opportunities for First Trust and Bank of Montreal
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between First and Bank is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded 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 First Trust 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 First Trust Exchange Traded 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 First Trust i.e., First Trust and Bank of Montreal go up and down completely randomly.
Pair Corralation between First Trust and Bank of Montreal
Given the investment horizon of 90 days First Trust Exchange Traded is expected to generate 0.28 times more return on investment than Bank of Montreal. However, First Trust Exchange Traded is 3.54 times less risky than Bank of Montreal. It trades about 0.03 of its potential returns per unit of risk. Bank of Montreal is currently generating about -0.04 per unit of risk. If you would invest 1,939 in First Trust Exchange Traded on September 3, 2024 and sell it today you would earn a total of 215.00 from holding First Trust Exchange Traded or generate 11.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 74.14% |
| Values | Daily Returns |
First Trust Exchange Traded vs. Bank of Montreal
Performance |
| Timeline |
| First Trust Exchange |
| Bank of Montreal |
First Trust and Bank of Montreal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Bank of Montreal
The main advantage of trading using opposite First Trust and Bank of Montreal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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.| First Trust vs. First Trust Exchange Traded | First Trust vs. First Trust Expanded | First Trust vs. BlackRock Future Health | First Trust vs. SPDR SP Health |
| Bank of Montreal vs. First Trust Indxx | Bank of Montreal vs. Direxion Daily Industrials | Bank of Montreal vs. NATO | Bank of Montreal vs. FlexShares STOXX Global |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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