Correlation Between National Bank and Premium Income

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

Diversification Opportunities for National Bank and Premium Income

-0.56

Correlation Coefficient

National Bank  Premium Income

Excellent diversification

The 3 months correlation between National and Premium is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and Premium Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premium Income 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 Premium Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premium Income has no effect on the direction of National Bank i.e., National Bank and Premium Income go up and down completely randomly.

Pair Corralation between National Bank and Premium Income

Assuming the 90 days horizon National Bank of is expected to generate 0.59 times more return on investment than Premium Income. However, National Bank of is 1.7 times less risky than Premium Income. It trades about 0.09 of its potential returns per unit of risk. Premium Income is currently generating about -0.11 per unit of risk. If you would invest  12,672  in National Bank of on October 7, 2024 and sell it today you would earn a total of  576.00  from holding National Bank of or generate 4.55% return on investment over 90 days.

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

National Bank of  vs.  Premium Income

National Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank of are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, National Bank is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Premium Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premium Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with National Bank and Premium Income

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

The idea behind National Bank of and Premium Income 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.