Correlation Between National Capital and BEO Bancorp

Can any of the company-specific risk be diversified away by investing in both National Capital and BEO Bancorp 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 Capital and BEO Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between National Capital Bank and BEO Bancorp, you can compare the effects of market volatilities on National Capital and BEO Bancorp 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 Capital with a short position of BEO Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Capital and BEO Bancorp.

Diversification Opportunities for National Capital and BEO Bancorp

-0.17

Correlation Coefficient

National Capital  BEO Bancorp

Good diversification

The 3 months correlation between National and BEO is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding National Capital Bank and BEO Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BEO Bancorp and National Capital 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 Capital Bank are associated (or correlated) with BEO Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BEO Bancorp has no effect on the direction of National Capital i.e., National Capital and BEO Bancorp go up and down completely randomly.

Pair Corralation between National Capital and BEO Bancorp

Given the investment horizon of 90 days National Capital Bank is expected to generate 9.07 times more return on investment than BEO Bancorp. However, National Capital is 9.07 times more volatile than BEO Bancorp. It trades about 0.09 of its potential returns per unit of risk. BEO Bancorp is currently generating about 0.06 per unit of risk. If you would invest  6,000  in National Capital Bank on September 27, 2024 and sell it today you would earn a total of  600.00  from holding National Capital Bank or generate 10.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

National Capital Bank  vs.  BEO Bancorp

National Capital Bank

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in National Capital Bank are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal fundamental indicators, National Capital sustained solid returns over the last few months and may actually be approaching a breakup point.

BEO Bancorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BEO Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, BEO Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with National Capital and BEO Bancorp

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

The idea behind National Capital Bank and BEO Bancorp 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.