Correlation Between National Bank and Metropolitan Steel
Can any of the company-specific risk be diversified away by investing in both National Bank and Metropolitan Steel 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 Metropolitan Steel 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 Metropolitan Steel Corp, you can compare the effects of market volatilities on National Bank and Metropolitan Steel 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 Metropolitan Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and Metropolitan Steel.
Diversification Opportunities for National Bank and Metropolitan Steel
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between National and Metropolitan is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and Metropolitan Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan Steel Corp 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 Metropolitan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan Steel Corp has no effect on the direction of National Bank i.e., National Bank and Metropolitan Steel go up and down completely randomly.
Pair Corralation between National Bank and Metropolitan Steel
Assuming the 90 days trading horizon National Bank of is expected to generate 1.14 times more return on investment than Metropolitan Steel. However, National Bank is 1.14 times more volatile than Metropolitan Steel Corp. It trades about 0.24 of its potential returns per unit of risk. Metropolitan Steel Corp is currently generating about -0.04 per unit of risk. If you would invest 5,381 in National Bank of on December 27, 2024 and sell it today you would earn a total of 2,332 from holding National Bank of or generate 43.34% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
National Bank of vs. Metropolitan Steel Corp
Performance |
Timeline |
National Bank |
Metropolitan Steel Corp |
National Bank and Metropolitan Steel Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with National Bank and Metropolitan Steel
The main advantage of trading using opposite National Bank and Metropolitan Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank position performs unexpectedly, Metropolitan Steel 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 Metropolitan Steel will offset losses from the drop in Metropolitan Steel's long position.National Bank vs. United Insurance | National Bank vs. Ghani Chemical Industries | National Bank vs. Sardar Chemical Industries | National Bank vs. Sindh Modaraba Management |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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