Correlation Between Bank of Montreal and Capitol Series

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

Diversification Opportunities for Bank of Montreal and Capitol Series

0.64

Correlation Coefficient

Bank of Montreal  Capitol Series

Poor diversification

The 3 months correlation between Bank and Capitol is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Montreal and Capitol Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capitol Series Trust 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 Capitol Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capitol Series Trust has no effect on the direction of Bank of Montreal i.e., Bank of Montreal and Capitol Series go up and down completely randomly.

Pair Corralation between Bank of Montreal and Capitol Series

Given the investment horizon of 90 days Bank of Montreal is expected to generate 4.61 times more return on investment than Capitol Series. However, Bank of Montreal is 4.61 times more volatile than Capitol Series Trust. It trades about -0.01 of its potential returns per unit of risk. Capitol Series Trust is currently generating about -0.06 per unit of risk. If you would invest  2,612  in Bank of Montreal on December 27, 2024 and sell it today you would lose (97.00) from holding Bank of Montreal or give up 3.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	41.67%
Values	Daily Returns

Bank of Montreal  vs.  Capitol Series Trust

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. In spite of comparatively stable technical and fundamental indicators, Bank of Montreal is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Capitol Series Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capitol Series Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Capitol Series is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bank of Montreal and Capitol Series

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

The idea behind Bank of Montreal and Capitol Series Trust 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.