Correlation Between North Dallas and Century Next

Can any of the company-specific risk be diversified away by investing in both North Dallas and Century Next 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 North Dallas and Century Next into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between North Dallas Bank and Century Next Financial, you can compare the effects of market volatilities on North Dallas and Century Next 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 North Dallas with a short position of Century Next. Check out your portfolio center. Please also check ongoing floating volatility patterns of North Dallas and Century Next.

Diversification Opportunities for North Dallas and Century Next

0.83

Correlation Coefficient

North Dallas  Century Next

Very poor diversification

The 3 months correlation between North and Century is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding North Dallas Bank and Century Next Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Next Financial and North Dallas 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 North Dallas Bank are associated (or correlated) with Century Next. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Next Financial has no effect on the direction of North Dallas i.e., North Dallas and Century Next go up and down completely randomly.

Pair Corralation between North Dallas and Century Next

Given the investment horizon of 90 days North Dallas Bank is expected to under-perform the Century Next. But the pink sheet apears to be less risky and, when comparing its historical volatility, North Dallas Bank is 1.13 times less risky than Century Next. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Century Next Financial is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,850  in Century Next Financial on September 2, 2024 and sell it today you would earn a total of  1,025  from holding Century Next Financial or generate 35.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	86.53%
Values	Daily Returns

North Dallas Bank  vs.  Century Next Financial

North Dallas Bank

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in North Dallas Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, North Dallas may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Century Next Financial

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Century Next Financial are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Century Next showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with North Dallas and Century Next

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

The idea behind North Dallas Bank and Century Next Financial 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.