Correlation Between SPACE and Bank of Montreal

Can any of the company-specific risk be diversified away by investing in both SPACE and Bank of Montreal 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 SPACE and Bank of Montreal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SPACE and Bank of Montreal, you can compare the effects of market volatilities on SPACE and Bank of Montreal 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 SPACE with a short position of Bank of Montreal. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPACE and Bank of Montreal.

Diversification Opportunities for SPACE and Bank of Montreal

0.81

Correlation Coefficient

SPACE  Bank of Montreal

Very poor diversification

The 3 months correlation between SPACE and Bank is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding SPACE and Bank of Montreal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Montreal and SPACE 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 SPACE are associated (or correlated) with Bank of Montreal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Montreal has no effect on the direction of SPACE i.e., SPACE and Bank of Montreal go up and down completely randomly.

Pair Corralation between SPACE and Bank of Montreal

Assuming the 90 days horizon SPACE is expected to generate 1.61 times more return on investment than Bank of Montreal. However, SPACE is 1.61 times more volatile than Bank of Montreal. It trades about 0.24 of its potential returns per unit of risk. Bank of Montreal is currently generating about 0.22 per unit of risk. If you would invest  43.00  in SPACE on August 30, 2024 and sell it today you would earn a total of  13.00  from holding SPACE or generate 30.23% return on investment over 90 days.

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

SPACE  vs.  Bank of Montreal

SPACE

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPACE are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, SPACE exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 comparatively abnormal basic indicators, Bank of Montreal unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPACE and Bank of Montreal

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

The idea behind SPACE and Bank of Montreal 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.