Correlation Between National Retail and Regions Financial

Can any of the company-specific risk be diversified away by investing in both National Retail and Regions Financial 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 Regions Financial 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 Regions Financial, you can compare the effects of market volatilities on National Retail and Regions Financial 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 Regions Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Retail and Regions Financial.

Diversification Opportunities for National Retail and Regions Financial

-0.52

Correlation Coefficient

National Retail  Regions Financial

Excellent diversification

The 3 months correlation between National and Regions is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding National Retail Properties and Regions Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regions Financial 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 Regions Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regions Financial has no effect on the direction of National Retail i.e., National Retail and Regions Financial go up and down completely randomly.

Pair Corralation between National Retail and Regions Financial

Assuming the 90 days trading horizon National Retail Properties is expected to generate 0.8 times more return on investment than Regions Financial. However, National Retail Properties is 1.25 times less risky than Regions Financial. It trades about 0.0 of its potential returns per unit of risk. Regions Financial is currently generating about -0.15 per unit of risk. If you would invest  3,990  in National Retail Properties on September 19, 2024 and sell it today you would lose (6.00) from holding National Retail Properties or give up 0.15% of portfolio value over 90 days.

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

National Retail Properties  vs.  Regions Financial

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 comparatively stable basic indicators, National Retail is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Regions Financial

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Regions Financial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Regions Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Retail and Regions Financial

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

The idea behind National Retail Properties and Regions 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.