Correlation Between Walmart and Bank of Montreal
Can any of the company-specific risk be diversified away by investing in both Walmart 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 Walmart 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 Walmart Inc CDR and Bank of Montreal, you can compare the effects of market volatilities on Walmart 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 Walmart with a short position of Bank of Montreal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Bank of Montreal.
Diversification Opportunities for Walmart and Bank of Montreal
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Walmart and Bank is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR 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 Walmart 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 Walmart Inc CDR 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 Walmart i.e., Walmart and Bank of Montreal go up and down completely randomly.
Pair Corralation between Walmart and Bank of Montreal
Assuming the 90 days trading horizon Walmart Inc CDR is expected to generate 33.37 times more return on investment than Bank of Montreal. However, Walmart is 33.37 times more volatile than Bank of Montreal. It trades about 0.52 of its potential returns per unit of risk. Bank of Montreal is currently generating about 0.39 per unit of risk. If you would invest 3,568 in Walmart Inc CDR on September 1, 2024 and sell it today you would earn a total of 469.00 from holding Walmart Inc CDR or generate 13.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 86.36% |
| Values | Daily Returns |
Walmart Inc CDR vs. Bank of Montreal
Performance |
| Timeline |
| Walmart Inc CDR |
| Bank of Montreal |
Walmart and Bank of Montreal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Bank of Montreal
The main advantage of trading using opposite Walmart and Bank of Montreal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart 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.| Walmart vs. Amazon CDR | Walmart vs. Berkshire Hathaway CDR | Walmart vs. UnitedHealth Group CDR | Walmart vs. Apple Inc CDR |
| Bank of Montreal vs. Labrador Iron Ore | Bank of Montreal vs. Advent Wireless | Bank of Montreal vs. Constellation Software | Bank of Montreal vs. Dream Office Real |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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