Correlation Between Western Investment and Bank of Montreal
Can any of the company-specific risk be diversified away by investing in both Western Investment 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 Western Investment 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 Western Investment and Bank of Montreal, you can compare the effects of market volatilities on Western Investment 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 Western Investment with a short position of Bank of Montreal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Investment and Bank of Montreal.
Diversification Opportunities for Western Investment and Bank of Montreal
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Western and Bank is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Western Investment 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 Western Investment 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 Western Investment 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 Western Investment i.e., Western Investment and Bank of Montreal go up and down completely randomly.
Pair Corralation between Western Investment and Bank of Montreal
Given the investment horizon of 90 days Western Investment is expected to generate 8.77 times more return on investment than Bank of Montreal. However, Western Investment is 8.77 times more volatile than Bank of Montreal. It trades about 0.04 of its potential returns per unit of risk. Bank of Montreal is currently generating about 0.17 per unit of risk. If you would invest 40.00 in Western Investment on September 14, 2024 and sell it today you would earn a total of 9.00 from holding Western Investment or generate 22.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Investment vs. Bank of Montreal
Performance |
| Timeline |
| Western Investment |
| Bank of Montreal |
Western Investment and Bank of Montreal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Investment and Bank of Montreal
The main advantage of trading using opposite Western Investment and Bank of Montreal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Investment 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.| Western Investment vs. Berkshire Hathaway CDR | Western Investment vs. E L Financial Corp | Western Investment vs. E L Financial 3 | Western Investment vs. Molson Coors Canada |
| Bank of Montreal vs. Western Investment | Bank of Montreal vs. Verizon Communications CDR | Bank of Montreal vs. Globex Mining Enterprises | Bank of Montreal vs. Data Communications Management |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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