Correlation Between Imperial Oil and Bank of Montreal
Can any of the company-specific risk be diversified away by investing in both Imperial Oil 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 Imperial Oil 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 Imperial Oil and Bank of Montreal, you can compare the effects of market volatilities on Imperial Oil 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 Imperial Oil with a short position of Bank of Montreal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imperial Oil and Bank of Montreal.
Diversification Opportunities for Imperial Oil and Bank of Montreal
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Imperial and Bank is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Oil 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 Imperial Oil 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 Imperial Oil 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 Imperial Oil i.e., Imperial Oil and Bank of Montreal go up and down completely randomly.
Pair Corralation between Imperial Oil and Bank of Montreal
Assuming the 90 days trading horizon Imperial Oil is expected to generate 1.65 times more return on investment than Bank of Montreal. However, Imperial Oil is 1.65 times more volatile than Bank of Montreal. It trades about 0.14 of its potential returns per unit of risk. Bank of Montreal is currently generating about -0.12 per unit of risk. If you would invest 9,076 in Imperial Oil on January 20, 2024 and sell it today you would earn a total of 375.00 from holding Imperial Oil or generate 4.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Imperial Oil vs. Bank of Montreal
Performance |
| Timeline |
| Imperial Oil |
| Bank of Montreal |
Imperial Oil and Bank of Montreal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Imperial Oil and Bank of Montreal
The main advantage of trading using opposite Imperial Oil and Bank of Montreal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Imperial Oil 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.| Imperial Oil vs. Enbridge | Imperial Oil vs. Canadian Natural Resources | Imperial Oil vs. Toronto Dominion Bank | Imperial Oil vs. Bank of Nova |
| Bank of Montreal vs. Slate Grocery REIT | Bank of Montreal vs. Fennec Pharmaceuticals | Bank of Montreal vs. Roots Corp | Bank of Montreal vs. Frontera Energy Corp |
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.
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