Correlation Between National Bank and Grand Canyon

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

Diversification Opportunities for National Bank and Grand Canyon

0.66
  Correlation Coefficient

Poor diversification

The 3 months correlation between National and Grand is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and Grand Canyon Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand Canyon Education 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 Grand Canyon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand Canyon Education has no effect on the direction of National Bank i.e., National Bank and Grand Canyon go up and down completely randomly.

Pair Corralation between National Bank and Grand Canyon

Assuming the 90 days horizon National Bank is expected to generate 3.3 times less return on investment than Grand Canyon. In addition to that, National Bank is 1.15 times more volatile than Grand Canyon Education. It trades about 0.02 of its total potential returns per unit of risk. Grand Canyon Education is currently generating about 0.08 per unit of volatility. If you would invest  13,900  in Grand Canyon Education on October 22, 2024 and sell it today you would earn a total of  2,700  from holding Grand Canyon Education or generate 19.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

National Bank Holdings  vs.  Grand Canyon Education

 Performance 
       Timeline  
National Bank Holdings 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in National Bank Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, National Bank reported solid returns over the last few months and may actually be approaching a breakup point.
Grand Canyon Education 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Grand Canyon Education are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Grand Canyon unveiled solid returns over the last few months and may actually be approaching a breakup point.

National Bank and Grand Canyon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with National Bank and Grand Canyon

The main advantage of trading using opposite National Bank and Grand Canyon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank position performs unexpectedly, Grand Canyon 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 Grand Canyon will offset losses from the drop in Grand Canyon's long position.
The idea behind National Bank Holdings and Grand Canyon Education 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.
Check out your portfolio center.
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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