Correlation Between Bank of Montreal and Strategy Shares

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

Diversification Opportunities for Bank of Montreal and Strategy Shares

0.62

Correlation Coefficient

Bank of Montreal  Strategy Shares

Poor diversification

The 3 months correlation between Bank and Strategy is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Montreal and Strategy Shares NewfoundReSolv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategy Shares Newf 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 Strategy Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategy Shares Newf has no effect on the direction of Bank of Montreal i.e., Bank of Montreal and Strategy Shares go up and down completely randomly.

Pair Corralation between Bank of Montreal and Strategy Shares

Given the investment horizon of 90 days Bank of Montreal is expected to under-perform the Strategy Shares. In addition to that, Bank of Montreal is 5.45 times more volatile than Strategy Shares NewfoundReSolve. It trades about -0.04 of its total potential returns per unit of risk. Strategy Shares NewfoundReSolve is currently generating about -0.06 per unit of volatility. If you would invest  3,239  in Strategy Shares NewfoundReSolve on December 26, 2024 and sell it today you would lose (118.00) from holding Strategy Shares NewfoundReSolve or give up 3.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	40.0%
Values	Daily Returns

Bank of Montreal  vs.  Strategy Shares NewfoundReSolv

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 latest unsteady performance, the Etf's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Strategy Shares Newf

Risk-Adjusted Performance

Very Weak

Over the last 90 days Strategy Shares NewfoundReSolve has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Strategy Shares is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Bank of Montreal and Strategy Shares

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

The idea behind Bank of Montreal and Strategy Shares NewfoundReSolve 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.