Correlation Between National Bank and Amdocs

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

Diversification Opportunities for National Bank and Amdocs

0.15

Correlation Coefficient

National Bank  Amdocs

Average diversification

The 3 months correlation between National and Amdocs is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and Amdocs Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amdocs Limited 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 Amdocs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amdocs Limited has no effect on the direction of National Bank i.e., National Bank and Amdocs go up and down completely randomly.

Pair Corralation between National Bank and Amdocs

Assuming the 90 days horizon National Bank Holdings is expected to generate 1.72 times more return on investment than Amdocs. However, National Bank is 1.72 times more volatile than Amdocs Limited. It trades about 0.12 of its potential returns per unit of risk. Amdocs Limited is currently generating about 0.01 per unit of risk. If you would invest  4,020  in National Bank Holdings on October 21, 2024 and sell it today you would earn a total of  160.00  from holding National Bank Holdings or generate 3.98% return on investment over 90 days.

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

National Bank Holdings  vs.  Amdocs Limited

National Bank Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, National Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Amdocs Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amdocs Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Amdocs is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with National Bank and Amdocs

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

The idea behind National Bank Holdings and Amdocs Limited 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.