Correlation Between National Bank and CHEVRON CDR

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

Diversification Opportunities for National Bank and CHEVRON CDR

-0.14

Correlation Coefficient

National Bank  CHEVRON CDR

Good diversification

The 3 months correlation between National and CHEVRON is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and CHEVRON CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHEVRON CDR 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 CHEVRON CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHEVRON CDR has no effect on the direction of National Bank i.e., National Bank and CHEVRON CDR go up and down completely randomly.

Pair Corralation between National Bank and CHEVRON CDR

Assuming the 90 days trading horizon National Bank of is expected to generate 0.83 times more return on investment than CHEVRON CDR. However, National Bank of is 1.21 times less risky than CHEVRON CDR. It trades about 0.08 of its potential returns per unit of risk. CHEVRON CDR is currently generating about 0.0 per unit of risk. If you would invest  1,640  in National Bank of on October 11, 2024 and sell it today you would earn a total of  854.00  from holding National Bank of or generate 52.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.69%
Values	Daily Returns

National Bank of  vs.  CHEVRON CDR

National Bank

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank of are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, National Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CHEVRON CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHEVRON CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, CHEVRON CDR is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with National Bank and CHEVRON CDR

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

The idea behind National Bank of and CHEVRON CDR 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.