Correlation Between National Capital and Truxton

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

Diversification Opportunities for National Capital and Truxton

0.02

Correlation Coefficient

National Capital  Truxton

Significant diversification

The 3 months correlation between National and Truxton is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding National Capital Bank and Truxton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truxton 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 Truxton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truxton has no effect on the direction of National Capital i.e., National Capital and Truxton go up and down completely randomly.

Pair Corralation between National Capital and Truxton

Given the investment horizon of 90 days National Capital Bank is expected to under-perform the Truxton. In addition to that, National Capital is 1.97 times more volatile than Truxton. It trades about -0.02 of its total potential returns per unit of risk. Truxton is currently generating about 0.03 per unit of volatility. If you would invest  7,240  in Truxton on December 22, 2024 and sell it today you would earn a total of  158.00  from holding Truxton or generate 2.18% return on investment over 90 days.

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

National Capital Bank  vs.  Truxton

National Capital Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Capital Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, National Capital is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Truxton

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Truxton are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Truxton is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with National Capital and Truxton

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

The idea behind National Capital Bank and Truxton 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.