Correlation Between National Bank and Invest Capital

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

Diversification Opportunities for National Bank and Invest Capital

0.6

Correlation Coefficient

National Bank  Invest Capital

Poor diversification

The 3 months correlation between National and Invest is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and Invest Capital Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invest Capital Investment 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 Invest Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invest Capital Investment has no effect on the direction of National Bank i.e., National Bank and Invest Capital go up and down completely randomly.

Pair Corralation between National Bank and Invest Capital

Assuming the 90 days trading horizon National Bank of is expected to under-perform the Invest Capital. But the stock apears to be less risky and, when comparing its historical volatility, National Bank of is 1.28 times less risky than Invest Capital. The stock trades about -0.18 of its potential returns per unit of risk. The Invest Capital Investment is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  165.00  in Invest Capital Investment on September 29, 2024 and sell it today you would lose (15.00) from holding Invest Capital Investment or give up 9.09% of portfolio value over 90 days.

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

National Bank of  vs.  Invest Capital Investment

National Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank of are ranked lower than 1 (%) 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.

Invest Capital Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invest Capital Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, Invest Capital is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with National Bank and Invest Capital

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

The idea behind National Bank of and Invest Capital Investment 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.