Correlation Between National Bank and Corning Incorporated

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

Diversification Opportunities for National Bank and Corning Incorporated

0.72

Correlation Coefficient

National Bank  Corning Incorporated

Poor diversification

The 3 months correlation between National and Corning is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and Corning Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corning Incorporated 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 Corning Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corning Incorporated has no effect on the direction of National Bank i.e., National Bank and Corning Incorporated go up and down completely randomly.

Pair Corralation between National Bank and Corning Incorporated

Assuming the 90 days horizon National Bank Holdings is expected to under-perform the Corning Incorporated. But the stock apears to be less risky and, when comparing its historical volatility, National Bank Holdings is 1.44 times less risky than Corning Incorporated. The stock trades about -0.11 of its potential returns per unit of risk. The Corning Incorporated is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  4,530  in Corning Incorporated on December 30, 2024 and sell it today you would lose (231.00) from holding Corning Incorporated or give up 5.1% of portfolio value over 90 days.

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

National Bank Holdings  vs.  Corning Incorporated

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 uncertain 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.

Corning Incorporated

Risk-Adjusted Performance

Very Weak

Over the last 90 days Corning Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Corning Incorporated 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 Corning Incorporated

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

The idea behind National Bank Holdings and Corning Incorporated 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.