Correlation Between National Bank and DIRTT Environmental

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

Diversification Opportunities for National Bank and DIRTT Environmental

0.58

Correlation Coefficient

National Bank  DIRTT Environmental

Very weak diversification

The 3 months correlation between National and DIRTT is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and DIRTT Environmental Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIRTT Environmental 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 DIRTT Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIRTT Environmental has no effect on the direction of National Bank i.e., National Bank and DIRTT Environmental go up and down completely randomly.

Pair Corralation between National Bank and DIRTT Environmental

Assuming the 90 days trading horizon National Bank is expected to generate 2.14 times less return on investment than DIRTT Environmental. But when comparing it to its historical volatility, National Bank of is 3.88 times less risky than DIRTT Environmental. It trades about 0.13 of its potential returns per unit of risk. DIRTT Environmental Solutions is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  51.00  in DIRTT Environmental Solutions on October 5, 2024 and sell it today you would earn a total of  54.00  from holding DIRTT Environmental Solutions or generate 105.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.68%
Values	Daily Returns

National Bank of  vs.  DIRTT Environmental Solutions

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 unfluctuating basic indicators, National Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

DIRTT Environmental

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DIRTT Environmental Solutions are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, DIRTT Environmental displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Bank and DIRTT Environmental

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

The idea behind National Bank of and DIRTT Environmental Solutions 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 CEOs Directory module to screen CEOs from public companies around the world.