Correlation Between National Bank and Kits Eyecare

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

Diversification Opportunities for National Bank and Kits Eyecare

0.04

Correlation Coefficient

National Bank  Kits Eyecare

Significant diversification

The 3 months correlation between National and Kits is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and Kits Eyecare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kits Eyecare 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 Kits Eyecare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kits Eyecare has no effect on the direction of National Bank i.e., National Bank and Kits Eyecare go up and down completely randomly.

Pair Corralation between National Bank and Kits Eyecare

Assuming the 90 days trading horizon National Bank is expected to generate 25.0 times less return on investment than Kits Eyecare. But when comparing it to its historical volatility, National Bank of is 8.68 times less risky than Kits Eyecare. It trades about 0.07 of its potential returns per unit of risk. Kits Eyecare is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  837.00  in Kits Eyecare on December 30, 2024 and sell it today you would earn a total of  349.00  from holding Kits Eyecare or generate 41.7% return on investment over 90 days.

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

National Bank of  vs.  Kits Eyecare

National Bank

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank of are ranked lower than 5 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Kits Eyecare

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kits Eyecare are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Kits Eyecare displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Bank and Kits Eyecare

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

The idea behind National Bank of and Kits Eyecare 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.