Correlation Between Bank of Montreal and Fair Isaac

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

Diversification Opportunities for Bank of Montreal and Fair Isaac

0.77

Correlation Coefficient

Bank of Montreal  Fair Isaac

Poor diversification

The 3 months correlation between Bank and Fair is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Montreal and Fair Isaac in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fair Isaac 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 Fair Isaac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fair Isaac has no effect on the direction of Bank of Montreal i.e., Bank of Montreal and Fair Isaac go up and down completely randomly.

Pair Corralation between Bank of Montreal and Fair Isaac

Assuming the 90 days horizon Bank of Montreal is expected to generate 0.75 times more return on investment than Fair Isaac. However, Bank of Montreal is 1.34 times less risky than Fair Isaac. It trades about 0.09 of its potential returns per unit of risk. Fair Isaac is currently generating about -0.22 per unit of risk. If you would invest  9,000  in Bank of Montreal on September 27, 2024 and sell it today you would earn a total of  242.00  from holding Bank of Montreal or generate 2.69% return on investment over 90 days.

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

Bank of Montreal  vs.  Fair Isaac

Bank of Montreal

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Montreal are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bank of Montreal reported solid returns over the last few months and may actually be approaching a breakup point.

Fair Isaac

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fair Isaac are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Fair Isaac reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of Montreal and Fair Isaac

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

The idea behind Bank of Montreal and Fair Isaac 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.