Correlation Between National Bank and Aecon

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

Diversification Opportunities for National Bank and Aecon

0.34

Correlation Coefficient

National Bank  Aecon

Weak diversification

The 3 months correlation between National and Aecon is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and Aecon Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aecon Group 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 Aecon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aecon Group has no effect on the direction of National Bank i.e., National Bank and Aecon go up and down completely randomly.

Pair Corralation between National Bank and Aecon

Assuming the 90 days horizon National Bank of is expected to generate 0.35 times more return on investment than Aecon. However, National Bank of is 2.87 times less risky than Aecon. It trades about -0.25 of its potential returns per unit of risk. Aecon Group is currently generating about -0.18 per unit of risk. If you would invest  9,483  in National Bank of on October 12, 2024 and sell it today you would lose (287.00) from holding National Bank of or give up 3.03% of portfolio value over 90 days.

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

National Bank of  vs.  Aecon Group

National Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, National Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Aecon Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aecon Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Aecon may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with National Bank and Aecon

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

The idea behind National Bank of and Aecon Group 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..