Correlation Between National Bank and Packages

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

Diversification Opportunities for National Bank and Packages

-0.01

Correlation Coefficient

National Bank  Packages

Good diversification

The 3 months correlation between National and Packages is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and Packages in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Packages 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 Packages. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Packages has no effect on the direction of National Bank i.e., National Bank and Packages go up and down completely randomly.

Pair Corralation between National Bank and Packages

Assuming the 90 days trading horizon National Bank of is expected to generate 1.23 times more return on investment than Packages. However, National Bank is 1.23 times more volatile than Packages. It trades about 0.24 of its potential returns per unit of risk. Packages is currently generating about 0.0 per unit of risk. If you would invest  5,305  in National Bank of on December 25, 2024 and sell it today you would earn a total of  2,315  from holding National Bank of or generate 43.64% 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.  Packages

National Bank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank of are ranked lower than 18 (%) 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.

Packages

Risk-Adjusted Performance

Very Weak

Over the last 90 days Packages has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Packages 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 Packages

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

The idea behind National Bank of and Packages 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.