Correlation Between National Capital and Bank of Utica

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

Diversification Opportunities for National Capital and Bank of Utica

-0.27

Correlation Coefficient

National Capital  Bank of Utica

Very good diversification

The 3 months correlation between National and Bank is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding National Capital Bank and Bank of Utica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Utica 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 Bank of Utica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Utica has no effect on the direction of National Capital i.e., National Capital and Bank of Utica go up and down completely randomly.

Pair Corralation between National Capital and Bank of Utica

Given the investment horizon of 90 days National Capital Bank is expected to generate 151.77 times more return on investment than Bank of Utica. However, National Capital is 151.77 times more volatile than Bank of Utica. It trades about 0.34 of its potential returns per unit of risk. Bank of Utica is currently generating about 0.29 per unit of risk. If you would invest  4,718  in National Capital Bank on September 3, 2024 and sell it today you would earn a total of  3,782  from holding National Capital Bank or generate 80.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

National Capital Bank  vs.  Bank of Utica

National Capital Bank

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in National Capital Bank are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, National Capital sustained solid returns over the last few months and may actually be approaching a breakup point.

Bank of Utica

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Utica are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Bank of Utica unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Capital and Bank of Utica

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

The idea behind National Capital Bank and Bank of Utica 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.