Correlation Between Bank of Montreal and Nexoptic Technology

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

Diversification Opportunities for Bank of Montreal and Nexoptic Technology

0.78

Correlation Coefficient

Bank of Montreal  Nexoptic Technology

Poor diversification

The 3 months correlation between Bank and Nexoptic is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Montreal and Nexoptic Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexoptic Technology Corp 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 Nexoptic Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexoptic Technology Corp has no effect on the direction of Bank of Montreal i.e., Bank of Montreal and Nexoptic Technology go up and down completely randomly.

Pair Corralation between Bank of Montreal and Nexoptic Technology

Assuming the 90 days trading horizon Bank of Montreal is expected to generate 2.16 times less return on investment than Nexoptic Technology. But when comparing it to its historical volatility, Bank of Montreal is 12.72 times less risky than Nexoptic Technology. It trades about 0.11 of its potential returns per unit of risk. Nexoptic Technology Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  8.00  in Nexoptic Technology Corp on September 20, 2024 and sell it today you would lose (5.00) from holding Nexoptic Technology Corp or give up 62.5% of portfolio value over 90 days.

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

Bank of Montreal  vs.  Nexoptic Technology Corp

Bank of Montreal

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Montreal are ranked lower than 6 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Nexoptic Technology Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nexoptic Technology Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Nexoptic Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of Montreal and Nexoptic Technology

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

The idea behind Bank of Montreal and Nexoptic Technology Corp 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.