Correlation Between NTG Nordic and Bank of Montreal

Can any of the company-specific risk be diversified away by investing in both NTG Nordic and Bank of Montreal 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 NTG Nordic and Bank of Montreal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NTG Nordic Transport and Bank of Montreal, you can compare the effects of market volatilities on NTG Nordic and Bank of Montreal 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 NTG Nordic with a short position of Bank of Montreal. Check out your portfolio center. Please also check ongoing floating volatility patterns of NTG Nordic and Bank of Montreal.

Diversification Opportunities for NTG Nordic and Bank of Montreal

-0.71

Correlation Coefficient

NTG Nordic  Bank of Montreal

Pay attention - limited upside

The 3 months correlation between NTG and Bank is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding NTG Nordic Transport and Bank of Montreal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Montreal and NTG Nordic 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 NTG Nordic Transport are associated (or correlated) with Bank of Montreal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Montreal has no effect on the direction of NTG Nordic i.e., NTG Nordic and Bank of Montreal go up and down completely randomly.

Pair Corralation between NTG Nordic and Bank of Montreal

Assuming the 90 days trading horizon NTG Nordic Transport is expected to generate 1.01 times more return on investment than Bank of Montreal. However, NTG Nordic is 1.01 times more volatile than Bank of Montreal. It trades about 0.17 of its potential returns per unit of risk. Bank of Montreal is currently generating about 0.11 per unit of risk. If you would invest  3,170  in NTG Nordic Transport on December 2, 2024 and sell it today you would earn a total of  160.00  from holding NTG Nordic Transport or generate 5.05% return on investment over 90 days.

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

NTG Nordic Transport  vs.  Bank of Montreal

NTG Nordic Transport

Risk-Adjusted Performance

Very Weak

Over the last 90 days NTG Nordic Transport has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Bank of Montreal

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Montreal are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bank of Montreal may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with NTG Nordic and Bank of Montreal

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

The idea behind NTG Nordic Transport and Bank of Montreal 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.