Correlation Between Bank Of Montreal and East West

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Bank Of Montreal and East West 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 Bank Of Montreal and East West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Of Montreal and East West Bancorp, you can compare the effects of market volatilities on Bank Of Montreal and East West 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 Bank Of Montreal with a short position of East West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Of Montreal and East West.

Diversification Opportunities for Bank Of Montreal and East West

0.24
  Correlation Coefficient

Modest diversification

The 3 months correlation between Bank and East is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Bank Of Montreal and East West Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East West Bancorp and Bank Of Montreal 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 Bank Of Montreal are associated (or correlated) with East West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East West Bancorp has no effect on the direction of Bank Of Montreal i.e., Bank Of Montreal and East West go up and down completely randomly.

Pair Corralation between Bank Of Montreal and East West

Considering the 90-day investment horizon Bank Of Montreal is expected to generate 4.29 times less return on investment than East West. But when comparing it to its historical volatility, Bank Of Montreal is 1.62 times less risky than East West. It trades about 0.05 of its potential returns per unit of risk. East West Bancorp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  5,213  in East West Bancorp on December 29, 2023 and sell it today you would earn a total of  2,712  from holding East West Bancorp or generate 52.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Bank Of Montreal  vs.  East West Bancorp

 Performance 
       Timeline  
Bank Of Montreal 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Bank Of Montreal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Bank Of Montreal is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.
East West Bancorp 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in East West Bancorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, East West may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Bank Of Montreal and East West Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bank Of Montreal and East West

The main advantage of trading using opposite Bank Of Montreal and East West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Of Montreal position performs unexpectedly, East West 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 East West will offset losses from the drop in East West's long position.
The idea behind Bank Of Montreal and East West Bancorp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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.

Other Complementary Tools

Bond Analysis
Evaluate and analyze corporate bonds as a potential investment for your portfolios.
Insider Screener
Find insiders across different sectors to evaluate their impact on performance
Volatility Analysis
Get historical volatility and risk analysis based on latest market data
Performance Analysis
Check effects of mean-variance optimization against your current asset allocation
Portfolio Comparator
Compare the composition, asset allocations and performance of any two portfolios in your account
Watchlist Optimization
Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm