Correlation Between National Bank and KSB Pumps

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

Diversification Opportunities for National Bank and KSB Pumps

0.49

Correlation Coefficient

National Bank  KSB Pumps

Very weak diversification

The 3 months correlation between National and KSB is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and KSB Pumps in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KSB Pumps 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 KSB Pumps. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KSB Pumps has no effect on the direction of National Bank i.e., National Bank and KSB Pumps go up and down completely randomly.

Pair Corralation between National Bank and KSB Pumps

Assuming the 90 days trading horizon National Bank of is expected to under-perform the KSB Pumps. In addition to that, National Bank is 1.35 times more volatile than KSB Pumps. It trades about -0.09 of its total potential returns per unit of risk. KSB Pumps is currently generating about 0.18 per unit of volatility. If you would invest  13,142  in KSB Pumps on September 27, 2024 and sell it today you would earn a total of  1,574  from holding KSB Pumps or generate 11.98% 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.  KSB Pumps

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.

KSB Pumps

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KSB Pumps are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KSB Pumps sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Bank and KSB Pumps

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

The idea behind National Bank of and KSB Pumps 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.