Correlation Between National Bank and Aluula Composites

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

Diversification Opportunities for National Bank and Aluula Composites

-0.73

Correlation Coefficient

National Bank  Aluula Composites

Pay attention - limited upside

The 3 months correlation between National and Aluula is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and Aluula Composites in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aluula Composites 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 Aluula Composites. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aluula Composites has no effect on the direction of National Bank i.e., National Bank and Aluula Composites go up and down completely randomly.

Pair Corralation between National Bank and Aluula Composites

Assuming the 90 days trading horizon National Bank is expected to generate 2.18 times less return on investment than Aluula Composites. But when comparing it to its historical volatility, National Bank of is 16.42 times less risky than Aluula Composites. It trades about 0.17 of its potential returns per unit of risk. Aluula Composites is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Aluula Composites on September 16, 2024 and sell it today you would lose (1.00) from holding Aluula Composites or give up 8.33% of portfolio value over 90 days.

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

National Bank of  vs.  Aluula Composites

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 stable basic indicators, National Bank is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Aluula Composites

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aluula Composites are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Aluula Composites may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with National Bank and Aluula Composites

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

The idea behind National Bank of and Aluula Composites 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.