Correlation Between National Bank and VIRG NATL

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

Diversification Opportunities for National Bank and VIRG NATL

0.85

Correlation Coefficient

National Bank  VIRG NATL

Very poor diversification

The 3 months correlation between National and VIRG is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and VIRG NATL BANKSH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VIRG NATL BANKSH 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 VIRG NATL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VIRG NATL BANKSH has no effect on the direction of National Bank i.e., National Bank and VIRG NATL go up and down completely randomly.

Pair Corralation between National Bank and VIRG NATL

Assuming the 90 days horizon National Bank Holdings is expected to generate 0.43 times more return on investment than VIRG NATL. However, National Bank Holdings is 2.34 times less risky than VIRG NATL. It trades about -0.04 of its potential returns per unit of risk. VIRG NATL BANKSH is currently generating about -0.05 per unit of risk. If you would invest  3,991  in National Bank Holdings on December 1, 2024 and sell it today you would lose (51.00) from holding National Bank Holdings or give up 1.28% of portfolio value over 90 days.

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

National Bank Holdings  vs.  VIRG NATL BANKSH

National Bank Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Bank Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

VIRG NATL BANKSH

Risk-Adjusted Performance

Very Weak

Over the last 90 days VIRG NATL BANKSH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with National Bank and VIRG NATL

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

The idea behind National Bank Holdings and VIRG NATL BANKSH 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.