Correlation Between National Capital and Bank of San Francisco

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

Diversification Opportunities for National Capital and Bank of San Francisco

-0.03

Correlation Coefficient

National Capital  Bank of San Francisco

Good diversification

The 3 months correlation between National and Bank is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding National Capital Bank and Bank of San in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of San Francisco 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 San Francisco. 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 San Francisco has no effect on the direction of National Capital i.e., National Capital and Bank of San Francisco go up and down completely randomly.

Pair Corralation between National Capital and Bank of San Francisco

Given the investment horizon of 90 days National Capital Bank is expected to generate 1.24 times more return on investment than Bank of San Francisco. However, National Capital is 1.24 times more volatile than Bank of San. It trades about 0.21 of its potential returns per unit of risk. Bank of San is currently generating about 0.01 per unit of risk. If you would invest  5,682  in National Capital Bank on December 28, 2024 and sell it today you would earn a total of  1,318  from holding National Capital Bank or generate 23.2% return on investment over 90 days.

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

National Capital Bank  vs.  Bank of San

National Capital Bank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in National Capital Bank are ranked lower than 16 (%) 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 San Francisco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank of San has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Bank of San Francisco is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with National Capital and Bank of San Francisco

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

The idea behind National Capital Bank and Bank of San 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.