Correlation Between NVIDIA CDR and Bank of Montreal

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

Diversification Opportunities for NVIDIA CDR and Bank of Montreal

0.8

Correlation Coefficient

NVIDIA CDR  Bank of Montreal

Very poor diversification

The 3 months correlation between NVIDIA and Bank is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA CDR 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 NVIDIA CDR 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 NVIDIA CDR 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 NVIDIA CDR i.e., NVIDIA CDR and Bank of Montreal go up and down completely randomly.

Pair Corralation between NVIDIA CDR and Bank of Montreal

Assuming the 90 days trading horizon NVIDIA CDR is expected to generate 2.55 times more return on investment than Bank of Montreal. However, NVIDIA CDR is 2.55 times more volatile than Bank of Montreal. It trades about 0.12 of its potential returns per unit of risk. Bank of Montreal is currently generating about 0.06 per unit of risk. If you would invest  1,088  in NVIDIA CDR on September 12, 2024 and sell it today you would earn a total of  2,067  from holding NVIDIA CDR or generate 189.98% return on investment over 90 days.

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

NVIDIA CDR  vs.  Bank of Montreal

NVIDIA CDR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA CDR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, NVIDIA CDR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Bank of Montreal

Risk-Adjusted Performance

25 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Montreal are ranked lower than 25 (%) 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.

Pair Trading with NVIDIA CDR and Bank of Montreal

The main advantage of trading using opposite NVIDIA CDR and Bank of Montreal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA CDR 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 NVIDIA CDR 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.