Correlation Between CI Financial and Bank of Montreal

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

Diversification Opportunities for CI Financial and Bank of Montreal

0.76

Correlation Coefficient

CI Financial  Bank of Montreal

Poor diversification

The 3 months correlation between CIX and Bank is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding CI Financial Corp 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 CI Financial 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 CI Financial Corp 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 CI Financial i.e., CI Financial and Bank of Montreal go up and down completely randomly.

Pair Corralation between CI Financial and Bank of Montreal

Assuming the 90 days trading horizon CI Financial is expected to generate 1.51 times less return on investment than Bank of Montreal. But when comparing it to its historical volatility, CI Financial Corp is 6.93 times less risky than Bank of Montreal. It trades about 0.22 of its potential returns per unit of risk. Bank of Montreal is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  14,373  in Bank of Montreal on March 23, 2025 and sell it today you would earn a total of  91.00  from holding Bank of Montreal or generate 0.63% return on investment over 90 days.

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

CI Financial Corp  vs.  Bank of Montreal

CI Financial Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CI Financial Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CI Financial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Bank of Montreal

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Montreal are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Bank of Montreal is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CI Financial and Bank of Montreal

The main advantage of trading using opposite CI Financial and Bank of Montreal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CI Financial 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 CI Financial Corp 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.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.