Correlation Between Regional Bank and North Square

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

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

Diversification Opportunities for Regional Bank and North Square

0.59

Correlation Coefficient

Regional Bank  North Square

Very weak diversification

The 3 months correlation between Regional and North is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Regional Bank Fund and North Square Kennedy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Square Kennedy and Regional 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 Regional Bank Fund are associated (or correlated) with North Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Square Kennedy has no effect on the direction of Regional Bank i.e., Regional Bank and North Square go up and down completely randomly.

Pair Corralation between Regional Bank and North Square

Assuming the 90 days horizon Regional Bank is expected to generate 1.5 times less return on investment than North Square. In addition to that, Regional Bank is 1.34 times more volatile than North Square Kennedy. It trades about 0.04 of its total potential returns per unit of risk. North Square Kennedy is currently generating about 0.09 per unit of volatility. If you would invest  997.00  in North Square Kennedy on December 2, 2024 and sell it today you would earn a total of  222.00  from holding North Square Kennedy or generate 22.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	36.77%
Values	Daily Returns

Regional Bank Fund  vs.  North Square Kennedy

Regional Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Regional Bank Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

North Square Kennedy

Risk-Adjusted Performance

Very Weak

Over the last 90 days North Square Kennedy has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, North Square is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Regional Bank and North Square

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

The idea behind Regional Bank Fund and North Square Kennedy 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.