Correlation Between National Bank and DATANG INTL

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

Diversification Opportunities for National Bank and DATANG INTL

-0.53

Correlation Coefficient

National Bank  DATANG INTL

Excellent diversification

The 3 months correlation between National and DATANG is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and DATANG INTL POW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DATANG INTL POW 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 DATANG INTL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DATANG INTL POW has no effect on the direction of National Bank i.e., National Bank and DATANG INTL go up and down completely randomly.

Pair Corralation between National Bank and DATANG INTL

Assuming the 90 days horizon National Bank Holdings is expected to generate 0.48 times more return on investment than DATANG INTL. However, National Bank Holdings is 2.1 times less risky than DATANG INTL. It trades about -0.1 of its potential returns per unit of risk. DATANG INTL POW is currently generating about -0.08 per unit of risk. If you would invest  4,360  in National Bank Holdings on October 6, 2024 and sell it today you would lose (140.00) from holding National Bank Holdings or give up 3.21% of portfolio value over 90 days.

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

National Bank Holdings  vs.  DATANG INTL POW

National Bank Holdings

Risk-Adjusted Performance

8 of 100

OK

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

DATANG INTL POW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DATANG INTL POW has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with National Bank and DATANG INTL

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

The idea behind National Bank Holdings and DATANG INTL POW 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..