Correlation Between Bank of Montreal and Gatekeeper Systems

Can any of the company-specific risk be diversified away by investing in both Bank of Montreal and Gatekeeper Systems 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 Gatekeeper Systems 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 Gatekeeper Systems, you can compare the effects of market volatilities on Bank of Montreal and Gatekeeper Systems 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 Gatekeeper Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Montreal and Gatekeeper Systems.

Diversification Opportunities for Bank of Montreal and Gatekeeper Systems

0.31

Correlation Coefficient

Bank of Montreal  Gatekeeper Systems

Weak diversification

The 3 months correlation between Bank and Gatekeeper is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Montreal and Gatekeeper Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gatekeeper Systems 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 Gatekeeper Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gatekeeper Systems has no effect on the direction of Bank of Montreal i.e., Bank of Montreal and Gatekeeper Systems go up and down completely randomly.

Pair Corralation between Bank of Montreal and Gatekeeper Systems

Assuming the 90 days trading horizon Bank of Montreal is expected to under-perform the Gatekeeper Systems. But the preferred stock apears to be less risky and, when comparing its historical volatility, Bank of Montreal is 7.17 times less risky than Gatekeeper Systems. The preferred stock trades about -0.05 of its potential returns per unit of risk. The Gatekeeper Systems is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  63.00  in Gatekeeper Systems on September 16, 2024 and sell it today you would earn a total of  7.00  from holding Gatekeeper Systems or generate 11.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Bank of Montreal  vs.  Gatekeeper Systems

Bank of Montreal

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Montreal are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Bank of Montreal is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Gatekeeper Systems

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gatekeeper Systems are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Gatekeeper Systems showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of Montreal and Gatekeeper Systems

The main advantage of trading using opposite Bank of Montreal and Gatekeeper Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Montreal position performs unexpectedly, Gatekeeper Systems 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 Gatekeeper Systems will offset losses from the drop in Gatekeeper Systems' long position.

The idea behind Bank of Montreal and Gatekeeper Systems 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.