Correlation Between National Bank and AGP

Can any of the company-specific risk be diversified away by investing in both National Bank and AGP 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 AGP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between National Bank of and AGP, you can compare the effects of market volatilities on National Bank and AGP 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 AGP. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and AGP.

Diversification Opportunities for National Bank and AGP

0.4

Correlation Coefficient

National Bank  AGP

Very weak diversification

The 3 months correlation between National and AGP is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and AGP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGP 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 of are associated (or correlated) with AGP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGP has no effect on the direction of National Bank i.e., National Bank and AGP go up and down completely randomly.

Pair Corralation between National Bank and AGP

Assuming the 90 days trading horizon National Bank is expected to generate 1.28 times less return on investment than AGP. In addition to that, National Bank is 1.08 times more volatile than AGP. It trades about 0.09 of its total potential returns per unit of risk. AGP is currently generating about 0.12 per unit of volatility. If you would invest  5,258  in AGP on September 27, 2024 and sell it today you would earn a total of  11,538  from holding AGP or generate 219.44% return on investment over 90 days.

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

National Bank of  vs.  AGP

National Bank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank of are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, National Bank is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

AGP

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AGP are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, AGP reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Bank and AGP

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

The idea behind National Bank of and AGP 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.