Correlation Between Canadian Natural and Bank of Montreal
Can any of the company-specific risk be diversified away by investing in both Canadian Natural 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 Canadian Natural 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 Canadian Natural Resources and Bank of Montreal, you can compare the effects of market volatilities on Canadian Natural 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 Canadian Natural with a short position of Bank of Montreal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Natural and Bank of Montreal.
Diversification Opportunities for Canadian Natural and Bank of Montreal
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Canadian and Bank is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Natural Resources 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 Canadian Natural 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 Canadian Natural Resources 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 Canadian Natural i.e., Canadian Natural and Bank of Montreal go up and down completely randomly.
Pair Corralation between Canadian Natural and Bank of Montreal
Assuming the 90 days trading horizon Canadian Natural Resources is expected to generate 1.73 times more return on investment than Bank of Montreal. However, Canadian Natural is 1.73 times more volatile than Bank of Montreal. It trades about 0.05 of its potential returns per unit of risk. Bank of Montreal is currently generating about 0.01 per unit of risk. If you would invest 7,337 in Canadian Natural Resources on January 25, 2024 and sell it today you would earn a total of 3,189 from holding Canadian Natural Resources or generate 43.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Natural Resources vs. Bank of Montreal
Performance |
| Timeline |
| Canadian Natural Res |
| Bank of Montreal |
Canadian Natural and Bank of Montreal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Natural and Bank of Montreal
The main advantage of trading using opposite Canadian Natural and Bank of Montreal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Natural 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.| Canadian Natural vs. Suncor Energy | Canadian Natural vs. Cenovus Energy | Canadian Natural vs. TC Energy Corp | Canadian Natural vs. Enbridge |
| Bank of Montreal vs. ECN Capital Corp | Bank of Montreal vs. Element Fleet Management | Bank of Montreal vs. Martinrea International | Bank of Montreal vs. Mullen Group |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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