Correlation Between Bank of Montreal and Postmedia Network

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

Diversification Opportunities for Bank of Montreal and Postmedia Network

-0.74

Correlation Coefficient

Bank of Montreal  Postmedia Network

Pay attention - limited upside

The 3 months correlation between Bank and Postmedia is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Montreal and Postmedia Network Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postmedia Network Canada 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 Postmedia Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postmedia Network Canada has no effect on the direction of Bank of Montreal i.e., Bank of Montreal and Postmedia Network go up and down completely randomly.

Pair Corralation between Bank of Montreal and Postmedia Network

Assuming the 90 days trading horizon Bank of Montreal is expected to generate 0.75 times more return on investment than Postmedia Network. However, Bank of Montreal is 1.34 times less risky than Postmedia Network. It trades about 0.3 of its potential returns per unit of risk. Postmedia Network Canada is currently generating about -0.13 per unit of risk. If you would invest  11,490  in Bank of Montreal on September 13, 2024 and sell it today you would earn a total of  2,636  from holding Bank of Montreal or generate 22.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Bank of Montreal  vs.  Postmedia Network Canada

Bank of Montreal

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Montreal are ranked lower than 23 (%) 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.

Postmedia Network Canada

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Postmedia Network Canada has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Bank of Montreal and Postmedia Network

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

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