Correlation Between Aeorema Communications and National Bank

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

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

Diversification Opportunities for Aeorema Communications and National Bank

-0.15

Correlation Coefficient

Aeorema Communications  National Bank

Good diversification

The 3 months correlation between Aeorema and National is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Aeorema Communications Plc and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank and Aeorema Communications 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 Aeorema Communications Plc 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 has no effect on the direction of Aeorema Communications i.e., Aeorema Communications and National Bank go up and down completely randomly.

Pair Corralation between Aeorema Communications and National Bank

Assuming the 90 days trading horizon Aeorema Communications Plc is expected to under-perform the National Bank. But the stock apears to be less risky and, when comparing its historical volatility, Aeorema Communications Plc is 26.12 times less risky than National Bank. The stock trades about -0.12 of its potential returns per unit of risk. The National Bank of is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  278.00  in National Bank of on November 29, 2024 and sell it today you would earn a total of  0.00  from holding National Bank of or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Aeorema Communications Plc  vs.  National Bank of

Aeorema Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aeorema Communications Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

National Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank of are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, National Bank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aeorema Communications and National Bank

The main advantage of trading using opposite Aeorema Communications and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aeorema Communications 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 Aeorema Communications Plc and National Bank of 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.