Correlation Between National Bank and US Bancorp
Can any of the company-specific risk be diversified away by investing in both National Bank and US Bancorp 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 US Bancorp 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 US Bancorp, you can compare the effects of market volatilities on National Bank and US Bancorp 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 US Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and US Bancorp.
Diversification Opportunities for National Bank and US Bancorp
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between National and UB5 is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp 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 US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of National Bank i.e., National Bank and US Bancorp go up and down completely randomly.
Pair Corralation between National Bank and US Bancorp
Assuming the 90 days horizon National Bank is expected to generate 1.14 times less return on investment than US Bancorp. In addition to that, National Bank is 1.08 times more volatile than US Bancorp. It trades about 0.04 of its total potential returns per unit of risk. US Bancorp is currently generating about 0.05 per unit of volatility. If you would invest 3,083 in US Bancorp on December 2, 2024 and sell it today you would earn a total of 1,391 from holding US Bancorp or generate 45.12% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
National Bank Holdings vs. US Bancorp
Performance |
Timeline |
National Bank Holdings |
US Bancorp |
National Bank and US Bancorp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with National Bank and US Bancorp
The main advantage of trading using opposite National Bank and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank position performs unexpectedly, US Bancorp 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 US Bancorp will offset losses from the drop in US Bancorp's long position.National Bank vs. CREDIT AGRICOLE | National Bank vs. Cembra Money Bank | National Bank vs. Geely Automobile Holdings | National Bank vs. OAKTRSPECLENDNEW |
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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