Correlation Between Cymbria and National Bank

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

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

Diversification Opportunities for Cymbria and National Bank

0.28

Correlation Coefficient

Cymbria  National Bank

Modest diversification

The 3 months correlation between Cymbria and National is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Cymbria and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank and Cymbria 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 Cymbria 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 Cymbria i.e., Cymbria and National Bank go up and down completely randomly.

Pair Corralation between Cymbria and National Bank

Assuming the 90 days trading horizon Cymbria is expected to generate 2.41 times less return on investment than National Bank. But when comparing it to its historical volatility, Cymbria is 1.37 times less risky than National Bank. It trades about 0.07 of its potential returns per unit of risk. National Bank of is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,790  in National Bank of on October 7, 2024 and sell it today you would earn a total of  730.00  from holding National Bank of or generate 40.78% return on investment over 90 days.

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

Cymbria  vs.  National Bank of

Cymbria

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cymbria are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, Cymbria is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

National Bank

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank of are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, National Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cymbria and National Bank

The main advantage of trading using opposite Cymbria and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cymbria 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 Cymbria 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.