Correlation Between National Bank and INTER CARS

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

Diversification Opportunities for National Bank and INTER CARS

-0.67

Correlation Coefficient

National Bank  INTER CARS

Excellent diversification

The 3 months correlation between National and INTER is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and INTER CARS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTER CARS SA 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 INTER CARS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTER CARS SA has no effect on the direction of National Bank i.e., National Bank and INTER CARS go up and down completely randomly.

Pair Corralation between National Bank and INTER CARS

Assuming the 90 days horizon National Bank is expected to generate 6.0 times less return on investment than INTER CARS. In addition to that, National Bank is 1.12 times more volatile than INTER CARS SA. It trades about 0.01 of its total potential returns per unit of risk. INTER CARS SA is currently generating about 0.08 per unit of volatility. If you would invest  11,200  in INTER CARS SA on December 10, 2024 and sell it today you would earn a total of  2,000  from holding INTER CARS SA or generate 17.86% return on investment over 90 days.

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

National Bank Holdings  vs.  INTER CARS SA

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

INTER CARS SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in INTER CARS SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, INTER CARS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Bank and INTER CARS

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

The idea behind National Bank Holdings and INTER CARS SA 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.