Correlation Between National Bank and Alpha Trust

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

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

Diversification Opportunities for National Bank and Alpha Trust

0.11

Correlation Coefficient

National Bank  Alpha Trust

Average diversification

The 3 months correlation between National and Alpha is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and Alpha Trust Andromeda in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Trust Andromeda and National 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 National Bank of are associated (or correlated) with Alpha Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Trust Andromeda has no effect on the direction of National Bank i.e., National Bank and Alpha Trust go up and down completely randomly.

Pair Corralation between National Bank and Alpha Trust

Assuming the 90 days trading horizon National Bank of is expected to generate 1.92 times more return on investment than Alpha Trust. However, National Bank is 1.92 times more volatile than Alpha Trust Andromeda. It trades about 0.58 of its potential returns per unit of risk. Alpha Trust Andromeda is currently generating about 0.15 per unit of risk. If you would invest  759.00  in National Bank of on October 24, 2024 and sell it today you would earn a total of  88.00  from holding National Bank of or generate 11.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

National Bank of  vs.  Alpha Trust Andromeda

National Bank

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank of are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, National Bank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Alpha Trust Andromeda

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alpha Trust Andromeda has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Alpha Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with National Bank and Alpha Trust

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

The idea behind National Bank of and Alpha Trust Andromeda 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.