Correlation Between Bank of Montreal and D Box

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

Diversification Opportunities for Bank of Montreal and D Box

0.8

Correlation Coefficient

Bank of Montreal  D Box

Very poor diversification

The 3 months correlation between Bank and DBO is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Montreal and D Box Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on D Box Technologies 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 D Box. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of D Box Technologies has no effect on the direction of Bank of Montreal i.e., Bank of Montreal and D Box go up and down completely randomly.

Pair Corralation between Bank of Montreal and D Box

Assuming the 90 days trading horizon Bank of Montreal is expected to generate 4.05 times less return on investment than D Box. But when comparing it to its historical volatility, Bank of Montreal is 6.09 times less risky than D Box. It trades about 0.21 of its potential returns per unit of risk. D Box Technologies is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  10.00  in D Box Technologies on September 23, 2024 and sell it today you would earn a total of  6.00  from holding D Box Technologies or generate 60.0% return on investment over 90 days.

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

Bank of Montreal  vs.  D Box Technologies

Bank of Montreal

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Montreal are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Bank of Montreal displayed solid returns over the last few months and may actually be approaching a breakup point.

D Box Technologies

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in D Box Technologies are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, D Box displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of Montreal and D Box

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

The idea behind Bank of Montreal and D Box 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..