Correlation Between National Bank and Mari Petroleum

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

Diversification Opportunities for National Bank and Mari Petroleum

-0.35

Correlation Coefficient

National Bank  Mari Petroleum

Very good diversification

The 3 months correlation between National and Mari is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and Mari Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mari Petroleum 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 Mari Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mari Petroleum has no effect on the direction of National Bank i.e., National Bank and Mari Petroleum go up and down completely randomly.

Pair Corralation between National Bank and Mari Petroleum

Assuming the 90 days trading horizon National Bank of is expected to generate 0.72 times more return on investment than Mari Petroleum. However, National Bank of is 1.39 times less risky than Mari Petroleum. It trades about 0.19 of its potential returns per unit of risk. Mari Petroleum is currently generating about -0.01 per unit of risk. If you would invest  5,919  in National Bank of on December 28, 2024 and sell it today you would earn a total of  1,710  from holding National Bank of or generate 28.89% return on investment over 90 days.

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

National Bank of  vs.  Mari Petroleum

National Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank of are ranked lower than 15 (%) 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.

Mari Petroleum

Risk-Adjusted Performance

Very Weak

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

Pair Trading with National Bank and Mari Petroleum

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

The idea behind National Bank of and Mari Petroleum 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.