Correlation Between National Bank and Bank of Montreal
Can any of the company-specific risk be diversified away by investing in both National Bank 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 National Bank 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 National Bank of and Bank of Montreal, you can compare the effects of market volatilities on National Bank 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 National Bank with a short position of Bank of Montreal. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and Bank of Montreal.
Diversification Opportunities for National Bank and Bank of Montreal
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between National and Bank is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of 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 National Bank 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 National Bank of 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 National Bank i.e., National Bank and Bank of Montreal go up and down completely randomly.
Pair Corralation between National Bank and Bank of Montreal
Assuming the 90 days horizon National Bank is expected to generate 6.69 times less return on investment than Bank of Montreal. In addition to that, National Bank is 1.38 times more volatile than Bank of Montreal. It trades about 0.03 of its total potential returns per unit of risk. Bank of Montreal is currently generating about 0.32 per unit of volatility. If you would invest 13,826 in Bank of Montreal on November 2, 2024 and sell it today you would earn a total of 597.00 from holding Bank of Montreal or generate 4.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Bank of vs. Bank of Montreal
Performance |
| Timeline |
| National Bank |
| Bank of Montreal |
National Bank and Bank of Montreal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Bank and Bank of Montreal
The main advantage of trading using opposite National Bank and Bank of Montreal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank 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.| National Bank vs. Canadian Imperial Bank | National Bank vs. Bank of Montreal | National Bank vs. Royal Bank of | National Bank vs. Bank of Nova |
| Bank of Montreal vs. Royal Bank of | Bank of Montreal vs. Canadian Imperial Bank | Bank of Montreal vs. Bank of Nova | Bank of Montreal vs. Toronto Dominion Bank |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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