Correlation Between National Bank and Fidelity National

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

Diversification Opportunities for National Bank and Fidelity National

0.47

Correlation Coefficient

National Bank  Fidelity National

Very weak diversification

The 3 months correlation between National and Fidelity is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and Fidelity National Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity National 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 Fidelity National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity National has no effect on the direction of National Bank i.e., National Bank and Fidelity National go up and down completely randomly.

Pair Corralation between National Bank and Fidelity National

Assuming the 90 days horizon National Bank Holdings is expected to generate 2.24 times more return on investment than Fidelity National. However, National Bank is 2.24 times more volatile than Fidelity National Information. It trades about 0.11 of its potential returns per unit of risk. Fidelity National Information is currently generating about 0.03 per unit of risk. If you would invest  3,637  in National Bank Holdings on October 6, 2024 and sell it today you would earn a total of  583.00  from holding National Bank Holdings or generate 16.03% return on investment over 90 days.

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

National Bank Holdings  vs.  Fidelity National Information

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.

Fidelity National

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity National Information are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fidelity National is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with National Bank and Fidelity National

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

The idea behind National Bank Holdings and Fidelity National Information 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 Transaction History module to view history of all your transactions and understand their impact on performance.