Correlation Between National Bank and SOFTBANK CORP

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

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

Diversification Opportunities for National Bank and SOFTBANK CORP

-0.33

Correlation Coefficient

National Bank  SOFTBANK CORP

Very good diversification

The 3 months correlation between National and SOFTBANK is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and SOFTBANK P ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOFTBANK P ADR and National Bank 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 Bank Holdings are associated (or correlated) with SOFTBANK CORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOFTBANK P ADR has no effect on the direction of National Bank i.e., National Bank and SOFTBANK CORP go up and down completely randomly.

Pair Corralation between National Bank and SOFTBANK CORP

Assuming the 90 days horizon National Bank Holdings is expected to generate 0.66 times more return on investment than SOFTBANK CORP. However, National Bank Holdings is 1.51 times less risky than SOFTBANK CORP. It trades about 0.1 of its potential returns per unit of risk. SOFTBANK P ADR is currently generating about -0.01 per unit of risk. If you would invest  3,855  in National Bank Holdings on September 3, 2024 and sell it today you would earn a total of  625.00  from holding National Bank Holdings or generate 16.21% return on investment over 90 days.

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

National Bank Holdings  vs.  SOFTBANK P ADR

National Bank Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, National Bank reported solid returns over the last few months and may actually be approaching a breakup point.

SOFTBANK P ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOFTBANK P ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, SOFTBANK CORP is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with National Bank and SOFTBANK CORP

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

The idea behind National Bank Holdings and SOFTBANK P ADR 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.