Correlation Between Western Copper and National Bank

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

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

Diversification Opportunities for Western Copper and National Bank

0.21

Correlation Coefficient

Western Copper  National Bank

Modest diversification

The 3 months correlation between Western and National is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Western Copper and and National Bank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank Holdings and Western Copper 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 Western Copper and are associated (or correlated) with National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank Holdings has no effect on the direction of Western Copper i.e., Western Copper and National Bank go up and down completely randomly.

Pair Corralation between Western Copper and National Bank

Assuming the 90 days trading horizon Western Copper and is expected to under-perform the National Bank. In addition to that, Western Copper is 1.4 times more volatile than National Bank Holdings. It trades about -0.11 of its total potential returns per unit of risk. National Bank Holdings is currently generating about -0.13 per unit of volatility. If you would invest  4,531  in National Bank Holdings on October 26, 2024 and sell it today you would lose (391.00) from holding National Bank Holdings or give up 8.63% of portfolio value over 90 days.

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

Western Copper and  vs.  National Bank Holdings

Western Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Copper and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Western Copper is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

National Bank Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, National Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Western Copper and National Bank

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

The idea behind Western Copper and and National Bank Holdings 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.