Correlation Between National Bank and Centerra Gold

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

Diversification Opportunities for National Bank and Centerra Gold

-0.5

Correlation Coefficient

National Bank  Centerra Gold

Very good diversification

The 3 months correlation between National and Centerra is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and Centerra Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centerra Gold 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 Centerra Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centerra Gold has no effect on the direction of National Bank i.e., National Bank and Centerra Gold go up and down completely randomly.

Pair Corralation between National Bank and Centerra Gold

Assuming the 90 days trading horizon National Bank of is expected to generate 0.14 times more return on investment than Centerra Gold. However, National Bank of is 7.25 times less risky than Centerra Gold. It trades about 0.15 of its potential returns per unit of risk. Centerra Gold is currently generating about -0.03 per unit of risk. If you would invest  2,537  in National Bank of on September 4, 2024 and sell it today you would earn a total of  78.00  from holding National Bank of or generate 3.07% return on investment over 90 days.

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

National Bank of  vs.  Centerra Gold

National Bank

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank of are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, National Bank is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Centerra Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centerra Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Centerra Gold is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with National Bank and Centerra Gold

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

The idea behind National Bank of and Centerra Gold 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.