Correlation Between Globex Mining and National Bank

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

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

Diversification Opportunities for Globex Mining and National Bank

0.73

Correlation Coefficient

Globex Mining  National Bank

Poor diversification

The 3 months correlation between Globex and National is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Globex Mining Enterprises and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank and Globex Mining 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 Globex Mining Enterprises 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 Globex Mining i.e., Globex Mining and National Bank go up and down completely randomly.

Pair Corralation between Globex Mining and National Bank

Assuming the 90 days trading horizon Globex Mining Enterprises is expected to generate 2.99 times more return on investment than National Bank. However, Globex Mining is 2.99 times more volatile than National Bank of. It trades about 0.17 of its potential returns per unit of risk. National Bank of is currently generating about 0.28 per unit of risk. If you would invest  105.00  in Globex Mining Enterprises on September 22, 2024 and sell it today you would earn a total of  10.00  from holding Globex Mining Enterprises or generate 9.52% return on investment over 90 days.

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

Globex Mining Enterprises  vs.  National Bank of

Globex Mining Enterprises

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Globex Mining Enterprises are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Globex Mining displayed solid returns over the last few months and may actually be approaching a breakup point.

National Bank

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank of are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, National Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Globex Mining and National Bank

The main advantage of trading using opposite Globex Mining and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Globex Mining 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 Globex Mining Enterprises 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.