Correlation Between National Retail and BANK CIMB

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

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

Diversification Opportunities for National Retail and BANK CIMB

0.7

Correlation Coefficient

National Retail  BANK CIMB

Poor diversification

The 3 months correlation between National and BANK is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding National Retail Properties and BANK CIMB NIAGA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK CIMB NIAGA and National Retail 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 National Retail Properties are associated (or correlated) with BANK CIMB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK CIMB NIAGA has no effect on the direction of National Retail i.e., National Retail and BANK CIMB go up and down completely randomly.

Pair Corralation between National Retail and BANK CIMB

Assuming the 90 days trading horizon National Retail Properties is expected to under-perform the BANK CIMB. But the stock apears to be less risky and, when comparing its historical volatility, National Retail Properties is 1.47 times less risky than BANK CIMB. The stock trades about -0.13 of its potential returns per unit of risk. The BANK CIMB NIAGA is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  10.00  in BANK CIMB NIAGA on October 11, 2024 and sell it today you would lose (0.45) from holding BANK CIMB NIAGA or give up 4.5% of portfolio value over 90 days.

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

National Retail Properties  vs.  BANK CIMB NIAGA

National Retail Prop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Retail Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

BANK CIMB NIAGA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BANK CIMB NIAGA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, BANK CIMB is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with National Retail and BANK CIMB

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

The idea behind National Retail Properties and BANK CIMB NIAGA 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.