Correlation Between National Bank and Associated Banc

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

Diversification Opportunities for National Bank and Associated Banc

0.85

Correlation Coefficient

National Bank  Associated Banc

Very poor diversification

The 3 months correlation between National and Associated is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and Associated Banc Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated Banc Corp 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 Associated Banc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated Banc Corp has no effect on the direction of National Bank i.e., National Bank and Associated Banc go up and down completely randomly.

Pair Corralation between National Bank and Associated Banc

Given the investment horizon of 90 days National Bank Holdings is expected to under-perform the Associated Banc. But the stock apears to be less risky and, when comparing its historical volatility, National Bank Holdings is 1.08 times less risky than Associated Banc. The stock trades about -0.14 of its potential returns per unit of risk. The Associated Banc Corp is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  2,587  in Associated Banc Corp on December 4, 2024 and sell it today you would lose (164.00) from holding Associated Banc Corp or give up 6.34% of portfolio value over 90 days.

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

National Bank Holdings  vs.  Associated Banc Corp

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. In spite of latest unfluctuating performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Associated Banc Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Associated Banc Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Associated Banc is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with National Bank and Associated Banc

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

The idea behind National Bank Holdings and Associated Banc Corp 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.