Correlation Between Nations Trust and Distilleries Company

Can any of the company-specific risk be diversified away by investing in both Nations Trust and Distilleries Company 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 Nations Trust and Distilleries Company into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nations Trust Bank and Distilleries Company of, you can compare the effects of market volatilities on Nations Trust and Distilleries Company 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 Nations Trust with a short position of Distilleries Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nations Trust and Distilleries Company.

Diversification Opportunities for Nations Trust and Distilleries Company

0.9

Correlation Coefficient

Nations Trust  Distilleries Company

Almost no diversification

The 3 months correlation between Nations and Distilleries is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Nations Trust Bank and Distilleries Company of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Distilleries Company and Nations Trust 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 Nations Trust Bank are associated (or correlated) with Distilleries Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Distilleries Company has no effect on the direction of Nations Trust i.e., Nations Trust and Distilleries Company go up and down completely randomly.

Pair Corralation between Nations Trust and Distilleries Company

Assuming the 90 days trading horizon Nations Trust Bank is expected to generate 1.08 times more return on investment than Distilleries Company. However, Nations Trust is 1.08 times more volatile than Distilleries Company of. It trades about 0.41 of its potential returns per unit of risk. Distilleries Company of is currently generating about 0.39 per unit of risk. If you would invest  10,925  in Nations Trust Bank on September 13, 2024 and sell it today you would earn a total of  4,800  from holding Nations Trust Bank or generate 43.94% return on investment over 90 days.

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

Nations Trust Bank  vs.  Distilleries Company of

Nations Trust Bank

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Nations Trust Bank are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nations Trust sustained solid returns over the last few months and may actually be approaching a breakup point.

Distilleries Company

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Distilleries Company of are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Distilleries Company sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nations Trust and Distilleries Company

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

The idea behind Nations Trust Bank and Distilleries Company of 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.