Correlation Between Ameriprise Financial and National Bank

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

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

Diversification Opportunities for Ameriprise Financial and National Bank

0.93

Correlation Coefficient

Ameriprise Financial  National Bank

Almost no diversification

The 3 months correlation between Ameriprise and National is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Ameriprise Financial 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 Ameriprise 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 Ameriprise Financial 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 Ameriprise Financial i.e., Ameriprise Financial and National Bank go up and down completely randomly.

Pair Corralation between Ameriprise Financial and National Bank

Assuming the 90 days horizon Ameriprise Financial is expected to generate 0.76 times more return on investment than National Bank. However, Ameriprise Financial is 1.32 times less risky than National Bank. It trades about 0.16 of its potential returns per unit of risk. National Bank Holdings is currently generating about 0.07 per unit of risk. If you would invest  41,348  in Ameriprise Financial on September 22, 2024 and sell it today you would earn a total of  9,132  from holding Ameriprise Financial or generate 22.09% return on investment over 90 days.

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

Ameriprise Financial  vs.  National Bank Holdings

Ameriprise Financial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ameriprise Financial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ameriprise Financial reported solid returns over the last few months and may actually be approaching a breakup point.

National Bank Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, National Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ameriprise Financial and National Bank

The main advantage of trading using opposite Ameriprise Financial and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ameriprise Financial 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 Ameriprise Financial 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.