Correlation Between Orbit Garant and Bank of Montreal

Can any of the company-specific risk be diversified away by investing in both Orbit Garant 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 Orbit Garant 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 Orbit Garant Drilling and Bank of Montreal, you can compare the effects of market volatilities on Orbit Garant 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 Orbit Garant with a short position of Bank of Montreal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orbit Garant and Bank of Montreal.

Diversification Opportunities for Orbit Garant and Bank of Montreal

-0.62

Correlation Coefficient

Orbit Garant  Bank of Montreal

Excellent diversification

The 3 months correlation between Orbit and Bank is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Orbit Garant Drilling 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 Orbit Garant 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 Orbit Garant Drilling 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 Orbit Garant i.e., Orbit Garant and Bank of Montreal go up and down completely randomly.

Pair Corralation between Orbit Garant and Bank of Montreal

Assuming the 90 days trading horizon Orbit Garant Drilling is expected to generate 7.88 times more return on investment than Bank of Montreal. However, Orbit Garant is 7.88 times more volatile than Bank of Montreal. It trades about 0.16 of its potential returns per unit of risk. Bank of Montreal is currently generating about -0.03 per unit of risk. If you would invest  84.00  in Orbit Garant Drilling on December 29, 2024 and sell it today you would earn a total of  37.00  from holding Orbit Garant Drilling or generate 44.05% return on investment over 90 days.

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

Orbit Garant Drilling  vs.  Bank of Montreal

Orbit Garant Drilling

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Orbit Garant Drilling are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Orbit Garant displayed solid returns over the last few months and may actually be approaching a breakup point.

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 somewhat strong basic indicators, Bank of Montreal is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Orbit Garant and Bank of Montreal

The main advantage of trading using opposite Orbit Garant and Bank of Montreal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orbit Garant 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 Orbit Garant Drilling 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.