Correlation Between Bank of Montreal and Forward Water

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

Diversification Opportunities for Bank of Montreal and Forward Water

-0.22

Correlation Coefficient

Bank of Montreal  Forward Water

Very good diversification

The 3 months correlation between Bank and Forward is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Montreal and Forward Water Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forward Water Techno 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 Forward Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forward Water Techno has no effect on the direction of Bank of Montreal i.e., Bank of Montreal and Forward Water go up and down completely randomly.

Pair Corralation between Bank of Montreal and Forward Water

Assuming the 90 days trading horizon Bank of Montreal is expected to generate 0.09 times more return on investment than Forward Water. However, Bank of Montreal is 11.74 times less risky than Forward Water. It trades about 0.17 of its potential returns per unit of risk. Forward Water Technologies is currently generating about -0.03 per unit of risk. If you would invest  2,367  in Bank of Montreal on October 1, 2024 and sell it today you would earn a total of  132.00  from holding Bank of Montreal or generate 5.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	64.52%
Values	Daily Returns

Bank of Montreal  vs.  Forward Water Technologies

Bank of Montreal

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Bank of Montreal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat unfluctuating basic indicators, Bank of Montreal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Forward Water Techno

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Forward Water Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Bank of Montreal and Forward Water

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

The idea behind Bank of Montreal and Forward Water Technologies 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.

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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.