Correlation Between NBS BANK and NICO HOLDINGS

Can any of the company-specific risk be diversified away by investing in both NBS BANK and NICO HOLDINGS 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 NBS BANK and NICO HOLDINGS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NBS BANK LIMITED and NICO HOLDINGS LIMITED, you can compare the effects of market volatilities on NBS BANK and NICO HOLDINGS 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 NBS BANK with a short position of NICO HOLDINGS. Check out your portfolio center. Please also check ongoing floating volatility patterns of NBS BANK and NICO HOLDINGS.

Diversification Opportunities for NBS BANK and NICO HOLDINGS

0.6

Correlation Coefficient

NBS BANK  NICO HOLDINGS

Poor diversification

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

Pair Corralation between NBS BANK and NICO HOLDINGS

Assuming the 90 days trading horizon NBS BANK is expected to generate 1.25 times less return on investment than NICO HOLDINGS. In addition to that, NBS BANK is 1.11 times more volatile than NICO HOLDINGS LIMITED. It trades about 0.35 of its total potential returns per unit of risk. NICO HOLDINGS LIMITED is currently generating about 0.48 per unit of volatility. If you would invest  28,703  in NICO HOLDINGS LIMITED on December 4, 2024 and sell it today you would earn a total of  54,365  from holding NICO HOLDINGS LIMITED or generate 189.41% return on investment over 90 days.

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

NBS BANK LIMITED  vs.  NICO HOLDINGS LIMITED

NBS BANK LIMITED

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in NBS BANK LIMITED are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, NBS BANK exhibited solid returns over the last few months and may actually be approaching a breakup point.

NICO HOLDINGS LIMITED

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in NICO HOLDINGS LIMITED are ranked lower than 37 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, NICO HOLDINGS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NBS BANK and NICO HOLDINGS

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

The idea behind NBS BANK LIMITED and NICO HOLDINGS LIMITED 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.