Correlation Between National Capital and Tompkins Financial

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

Diversification Opportunities for National Capital and Tompkins Financial

-0.36

Correlation Coefficient

National Capital  Tompkins Financial

Very good diversification

The 3 months correlation between National and Tompkins is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding National Capital Bank and Tompkins Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tompkins Financial 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 Tompkins Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tompkins Financial has no effect on the direction of National Capital i.e., National Capital and Tompkins Financial go up and down completely randomly.

Pair Corralation between National Capital and Tompkins Financial

Given the investment horizon of 90 days National Capital Bank is expected to generate 35.09 times more return on investment than Tompkins Financial. However, National Capital is 35.09 times more volatile than Tompkins Financial. It trades about 0.17 of its potential returns per unit of risk. Tompkins Financial is currently generating about -0.2 per unit of risk. If you would invest  6,875  in National Capital Bank on September 20, 2024 and sell it today you would earn a total of  625.00  from holding National Capital Bank or generate 9.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

National Capital Bank  vs.  Tompkins Financial

National Capital Bank

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in National Capital Bank are ranked lower than 22 (%) 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.

Tompkins Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tompkins Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady primary indicators, Tompkins Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Capital and Tompkins Financial

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

The idea behind National Capital Bank and Tompkins Financial 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.