Correlation Between Bank of Montreal and East West
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
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and East is 0.61. 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 0.62 times more return on investment than East West. However, Bank of Montreal is 1.62 times less risky than East West. It trades about -0.25 of its potential returns per unit of risk. East West Bancorp is currently generating about -0.16 per unit of risk. If you would invest 9,613 in Bank of Montreal on January 20, 2024 and sell it today you would lose (512.00) from holding Bank of Montreal or give up 5.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Bank of Montreal vs. East West Bancorp
Performance |
| Timeline |
| Bank of Montreal |
| East West Bancorp |
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.| 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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