Correlation Between G8 EDUCATION and National Bank

Can any of the company-specific risk be diversified away by investing in both G8 EDUCATION 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 G8 EDUCATION and National Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between G8 EDUCATION and National Bank Holdings, you can compare the effects of market volatilities on G8 EDUCATION 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 G8 EDUCATION with a short position of National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of G8 EDUCATION and National Bank.

Diversification Opportunities for G8 EDUCATION and National Bank

0.61

Correlation Coefficient

G8 EDUCATION  National Bank

Poor diversification

The 3 months correlation between 3EAG and National is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding G8 EDUCATION 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 G8 EDUCATION 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 G8 EDUCATION 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 G8 EDUCATION i.e., G8 EDUCATION and National Bank go up and down completely randomly.

Pair Corralation between G8 EDUCATION and National Bank

Assuming the 90 days trading horizon G8 EDUCATION is expected to generate 0.95 times more return on investment than National Bank. However, G8 EDUCATION is 1.06 times less risky than National Bank. It trades about -0.02 of its potential returns per unit of risk. National Bank Holdings is currently generating about -0.11 per unit of risk. If you would invest  76.00  in G8 EDUCATION on December 22, 2024 and sell it today you would lose (2.00) from holding G8 EDUCATION or give up 2.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

G8 EDUCATION  vs.  National Bank Holdings

G8 EDUCATION

Risk-Adjusted Performance

Very Weak

Over the last 90 days G8 EDUCATION has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, G8 EDUCATION is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

National Bank Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Bank Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with G8 EDUCATION and National Bank

The main advantage of trading using opposite G8 EDUCATION and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G8 EDUCATION 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 G8 EDUCATION 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.

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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.