Correlation Between NextSource Materials and Bank of Montreal
Can any of the company-specific risk be diversified away by investing in both NextSource Materials 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 NextSource Materials 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 NextSource Materials and Bank of Montreal, you can compare the effects of market volatilities on NextSource Materials 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 NextSource Materials with a short position of Bank of Montreal. Check out your portfolio center. Please also check ongoing floating volatility patterns of NextSource Materials and Bank of Montreal.
Diversification Opportunities for NextSource Materials and Bank of Montreal
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NextSource and Bank is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding NextSource Materials 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 NextSource Materials 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 NextSource Materials 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 NextSource Materials i.e., NextSource Materials and Bank of Montreal go up and down completely randomly.
Pair Corralation between NextSource Materials and Bank of Montreal
Assuming the 90 days trading horizon NextSource Materials is expected to generate 12.75 times more return on investment than Bank of Montreal. However, NextSource Materials is 12.75 times more volatile than Bank of Montreal. It trades about 0.16 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 73.00 in NextSource Materials on October 31, 2024 and sell it today you would earn a total of 11.00 from holding NextSource Materials or generate 15.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
NextSource Materials vs. Bank of Montreal
Performance |
| Timeline |
| NextSource Materials |
| Bank of Montreal |
NextSource Materials and Bank of Montreal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NextSource Materials and Bank of Montreal
The main advantage of trading using opposite NextSource Materials and Bank of Montreal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NextSource Materials 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.| NextSource Materials vs. Leading Edge Materials | NextSource Materials vs. Northern Graphite | NextSource Materials vs. Lomiko Metals | NextSource Materials vs. Elcora Advanced Materials |
| Bank of Montreal vs. Advent Wireless | Bank of Montreal vs. MAG Silver Corp | Bank of Montreal vs. Mako Mining Corp | Bank of Montreal vs. Titanium Transportation Group |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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