Correlation Between Bank of Nova Scotia and Bank of Montreal
Can any of the company-specific risk be diversified away by investing in both Bank of Nova Scotia 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 Bank of Nova Scotia 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 Bank of Nova and Bank of Montreal, you can compare the effects of market volatilities on Bank of Nova Scotia 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 Bank of Nova Scotia with a short position of Bank of Montreal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Nova Scotia and Bank of Montreal.
Diversification Opportunities for Bank of Nova Scotia and Bank of Montreal
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and Bank is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Nova 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 Bank of Nova Scotia 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 Nova 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 Bank of Nova Scotia i.e., Bank of Nova Scotia and Bank of Montreal go up and down completely randomly.
Pair Corralation between Bank of Nova Scotia and Bank of Montreal
Considering the 90-day investment horizon Bank of Nova is expected to under-perform the Bank of Montreal. In addition to that, Bank of Nova Scotia is 1.05 times more volatile than Bank of Montreal. It trades about -0.17 of its total potential returns per unit of risk. Bank of Montreal is currently generating about -0.11 per unit of volatility. If you would invest 9,404 in Bank of Montreal on January 19, 2024 and sell it today you would lose (266.00) from holding Bank of Montreal or give up 2.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Nova vs. Bank of Montreal
Performance |
| Timeline |
| Bank of Nova Scotia |
| Bank of Montreal |
Bank of Nova Scotia and Bank of Montreal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Nova Scotia and Bank of Montreal
The main advantage of trading using opposite Bank of Nova Scotia and Bank of Montreal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Nova Scotia 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.| Bank of Nova Scotia vs. Toronto Dominion Bank | Bank of Nova Scotia vs. Royal Bank of | Bank of Nova Scotia vs. Canadian Imperial Bank | Bank of Nova Scotia vs. JPMorgan Chase Co |
| Bank of Montreal vs. Canadian Imperial Bank | Bank of Montreal vs. Toronto Dominion Bank | Bank of Montreal vs. Royal Bank of | Bank of Montreal vs. Citigroup |
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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