Correlation Between Bank Of Montreal and ProShares UltraPro

Can any of the company-specific risk be diversified away by investing in both Bank Of Montreal and ProShares UltraPro 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 ProShares UltraPro 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 ProShares UltraPro SP500, you can compare the effects of market volatilities on Bank Of Montreal and ProShares UltraPro 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 ProShares UltraPro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Of Montreal and ProShares UltraPro.

Diversification Opportunities for Bank Of Montreal and ProShares UltraPro

-0.62

Correlation Coefficient

Bank Of Montreal  ProShares UltraPro

Excellent diversification

The 3 months correlation between Bank and ProShares is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Bank Of Montreal and ProShares UltraPro SP500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraPro SP500 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 ProShares UltraPro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraPro SP500 has no effect on the direction of Bank Of Montreal i.e., Bank Of Montreal and ProShares UltraPro go up and down completely randomly.

Pair Corralation between Bank Of Montreal and ProShares UltraPro

Given the investment horizon of 90 days Bank Of Montreal is expected to generate 1.58 times less return on investment than ProShares UltraPro. But when comparing it to its historical volatility, Bank Of Montreal is 1.38 times less risky than ProShares UltraPro. It trades about 0.05 of its potential returns per unit of risk. ProShares UltraPro SP500 is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  7,762  in ProShares UltraPro SP500 on September 25, 2024 and sell it today you would earn a total of  1,386  from holding ProShares UltraPro SP500 or generate 17.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	17.6%
Values	Daily Returns

Bank Of Montreal  vs.  ProShares UltraPro SP500

Bank Of Montreal

Risk-Adjusted Performance

0 of 100

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.

ProShares UltraPro SP500

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraPro SP500 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, ProShares UltraPro may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bank Of Montreal and ProShares UltraPro

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

The idea behind Bank Of Montreal and ProShares UltraPro SP500 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..