Correlation Between National Bank and Intact Financial

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

Diversification Opportunities for National Bank and Intact Financial

0.54

Correlation Coefficient

National Bank  Intact Financial

Very weak diversification

The 3 months correlation between National and Intact is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and Intact Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intact Financial Corp 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 Intact Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intact Financial Corp has no effect on the direction of National Bank i.e., National Bank and Intact Financial go up and down completely randomly.

Pair Corralation between National Bank and Intact Financial

Assuming the 90 days trading horizon National Bank of is expected to generate 0.8 times more return on investment than Intact Financial. However, National Bank of is 1.25 times less risky than Intact Financial. It trades about 0.17 of its potential returns per unit of risk. Intact Financial Corp is currently generating about 0.1 per unit of risk. If you would invest  2,281  in National Bank of on September 3, 2024 and sell it today you would earn a total of  128.00  from holding National Bank of or generate 5.61% return on investment over 90 days.

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

National Bank of  vs.  Intact Financial Corp

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.

Intact Financial Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Intact Financial Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Intact Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with National Bank and Intact Financial

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

The idea behind National Bank of and Intact Financial Corp 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.