Correlation Between CBH and North American

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

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

Diversification Opportunities for CBH and North American

0.94

Correlation Coefficient

CBH  North American

Almost no diversification

The 3 months correlation between CBH and North is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding CBH and North American Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Financial and CBH 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 CBH are associated (or correlated) with North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Financial has no effect on the direction of CBH i.e., CBH and North American go up and down completely randomly.

Pair Corralation between CBH and North American

If you would invest  493.00  in North American Financial on September 1, 2024 and sell it today you would earn a total of  38.00  from holding North American Financial or generate 7.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	4.76%
Values	Daily Returns

CBH  vs.  North American Financial

CBH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CBH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, CBH is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

North American Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in North American Financial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, North American reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CBH and North American

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

The idea behind CBH and North American Financial 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.