Correlation Between COMMERCIAL BANK and Nations Trust

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

By analyzing existing cross correlation between COMMERCIAL BANK OF and Nations Trust Bank, you can compare the effects of market volatilities on COMMERCIAL BANK and Nations Trust 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 COMMERCIAL BANK with a short position of Nations Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of COMMERCIAL BANK and Nations Trust.

Diversification Opportunities for COMMERCIAL BANK and Nations Trust

0.98

Correlation Coefficient

COMMERCIAL BANK  Nations Trust

Almost no diversification

The 3 months correlation between COMMERCIAL and Nations is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding COMMERCIAL BANK OF and Nations Trust Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nations Trust Bank and COMMERCIAL BANK 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 COMMERCIAL BANK OF are associated (or correlated) with Nations Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nations Trust Bank has no effect on the direction of COMMERCIAL BANK i.e., COMMERCIAL BANK and Nations Trust go up and down completely randomly.

Pair Corralation between COMMERCIAL BANK and Nations Trust

Assuming the 90 days trading horizon COMMERCIAL BANK OF is expected to generate 0.78 times more return on investment than Nations Trust. However, COMMERCIAL BANK OF is 1.28 times less risky than Nations Trust. It trades about 0.45 of its potential returns per unit of risk. Nations Trust Bank is currently generating about 0.25 per unit of risk. If you would invest  9,780  in COMMERCIAL BANK OF on October 10, 2024 and sell it today you would earn a total of  1,570  from holding COMMERCIAL BANK OF or generate 16.05% return on investment over 90 days.

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

COMMERCIAL BANK OF  vs.  Nations Trust Bank

COMMERCIAL BANK

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in COMMERCIAL BANK OF are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, COMMERCIAL BANK sustained solid returns over the last few months and may actually be approaching a breakup point.

Nations Trust Bank

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nations Trust Bank are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nations Trust sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with COMMERCIAL BANK and Nations Trust

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

The idea behind COMMERCIAL BANK OF and Nations Trust Bank 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.