Correlation Between National Bank and Gatron Industries

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

Diversification Opportunities for National Bank and Gatron Industries

-0.47

Correlation Coefficient

National Bank  Gatron Industries

Very good diversification

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

Pair Corralation between National Bank and Gatron Industries

Assuming the 90 days trading horizon National Bank of is expected to generate 2.22 times more return on investment than Gatron Industries. However, National Bank is 2.22 times more volatile than Gatron Industries. It trades about 0.14 of its potential returns per unit of risk. Gatron Industries is currently generating about -0.07 per unit of risk. If you would invest  5,795  in National Bank of on September 15, 2024 and sell it today you would earn a total of  1,436  from holding National Bank of or generate 24.78% return on investment over 90 days.

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

National Bank of  vs.  Gatron Industries

National Bank

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank of are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, National Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Gatron Industries

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with National Bank and Gatron Industries

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

The idea behind National Bank of and Gatron Industries 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.