Correlation Between Bank of Montreal and ZURICH INSURANCE

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

Diversification Opportunities for Bank of Montreal and ZURICH INSURANCE

-0.22

Correlation Coefficient

Bank of Montreal  ZURICH INSURANCE

Very good diversification

The 3 months correlation between Bank and ZURICH is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Montreal and ZURICH INSURANCE GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZURICH INSURANCE 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 ZURICH INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZURICH INSURANCE has no effect on the direction of Bank of Montreal i.e., Bank of Montreal and ZURICH INSURANCE go up and down completely randomly.

Pair Corralation between Bank of Montreal and ZURICH INSURANCE

Assuming the 90 days horizon Bank of Montreal is expected to under-perform the ZURICH INSURANCE. But the stock apears to be less risky and, when comparing its historical volatility, Bank of Montreal is 1.26 times less risky than ZURICH INSURANCE. The stock trades about -0.01 of its potential returns per unit of risk. The ZURICH INSURANCE GROUP is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,800  in ZURICH INSURANCE GROUP on December 29, 2024 and sell it today you would earn a total of  420.00  from holding ZURICH INSURANCE GROUP or generate 15.0% return on investment over 90 days.

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

Bank of Montreal  vs.  ZURICH INSURANCE GROUP

Bank of Montreal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank of Montreal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Bank of Montreal is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ZURICH INSURANCE

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ZURICH INSURANCE GROUP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ZURICH INSURANCE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of Montreal and ZURICH INSURANCE

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

The idea behind Bank of Montreal and ZURICH INSURANCE GROUP 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.