Correlation Between National Bank and Woodlands Financial

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

Diversification Opportunities for National Bank and Woodlands Financial

-0.11

Correlation Coefficient

National Bank  Woodlands Financial

Good diversification

The 3 months correlation between National and Woodlands is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and Woodlands Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woodlands 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 Woodlands Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woodlands Financial has no effect on the direction of National Bank i.e., National Bank and Woodlands Financial go up and down completely randomly.

Pair Corralation between National Bank and Woodlands Financial

Given the investment horizon of 90 days National Bank Holdings is expected to under-perform the Woodlands Financial. But the stock apears to be less risky and, when comparing its historical volatility, National Bank Holdings is 1.85 times less risky than Woodlands Financial. The stock trades about -0.1 of its potential returns per unit of risk. The Woodlands Financial Services is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,976  in Woodlands Financial Services on December 30, 2024 and sell it today you would earn a total of  274.00  from holding Woodlands Financial Services or generate 13.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.94%
Values	Daily Returns

National Bank Holdings  vs.  Woodlands Financial Services

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.

Woodlands Financial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Woodlands Financial Services are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Woodlands Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Bank and Woodlands Financial

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

The idea behind National Bank Holdings and Woodlands Financial Services 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.