Correlation Between National Bank and BOK Financial

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

Diversification Opportunities for National Bank and BOK Financial

0.86

Correlation Coefficient

National Bank  BOK Financial

Very poor diversification

The 3 months correlation between National and BOK is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and BOK Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOK Financial 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 BOK Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOK Financial has no effect on the direction of National Bank i.e., National Bank and BOK Financial go up and down completely randomly.

Pair Corralation between National Bank and BOK Financial

Given the investment horizon of 90 days National Bank is expected to generate 1.55 times less return on investment than BOK Financial. In addition to that, National Bank is 1.18 times more volatile than BOK Financial. It trades about 0.05 of its total potential returns per unit of risk. BOK Financial is currently generating about 0.09 per unit of volatility. If you would invest  8,983  in BOK Financial on September 29, 2024 and sell it today you would earn a total of  1,837  from holding BOK Financial or generate 20.45% return on investment over 90 days.

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

National Bank Holdings  vs.  BOK Financial

National Bank Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, National Bank is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

BOK Financial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BOK Financial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward-looking signals, BOK Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with National Bank and BOK Financial

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

The idea behind National Bank Holdings and BOK Financial 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.