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 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
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Walmart and Bank is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Walmart 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 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
Considering the 90-day investment horizon Walmart is expected to generate 1.62 times less return on investment than Bank of Montreal. But when comparing it to its historical volatility, Walmart is 4.12 times less risky than Bank of Montreal. It trades about 0.17 of its potential returns per unit of risk. Bank of Montreal is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,684 in Bank of Montreal on September 1, 2024 and sell it today you would earn a total of 1,317 from holding Bank of Montreal or generate 78.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.63% |
| Values | Daily Returns |
Walmart vs. Bank of Montreal
Performance |
| Timeline |
| Walmart |
| 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. Ingles Markets Incorporated | Walmart vs. Sendas Distribuidora SA | Walmart vs. Grocery Outlet Holding | Walmart vs. Ocado Group plc |
| Bank of Montreal vs. First Trust Exchange Traded | Bank of Montreal vs. Ultimus Managers Trust | Bank of Montreal vs. Horizon Kinetics Medical | Bank of Montreal vs. Harbor Health Care |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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