Correlation Between OFG Bancorp and National Bank

Can any of the company-specific risk be diversified away by investing in both OFG Bancorp and National Bank 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 OFG Bancorp and National Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for OFG Bancorp and National Bank

0.86

Correlation Coefficient

OFG Bancorp  National Bank

Very poor diversification

The 3 months correlation between OFG and National is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding OFG Bancorp and National Bank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank Holdings and OFG Bancorp 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 OFG Bancorp are associated (or correlated) with National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank Holdings has no effect on the direction of OFG Bancorp i.e., OFG Bancorp and National Bank go up and down completely randomly.

Pair Corralation between OFG Bancorp and National Bank

Considering the 90-day investment horizon OFG Bancorp is expected to generate 1.08 times more return on investment than National Bank. However, OFG Bancorp is 1.08 times more volatile than National Bank Holdings. It trades about -0.04 of its potential returns per unit of risk. National Bank Holdings is currently generating about -0.09 per unit of risk. If you would invest  4,295  in OFG Bancorp on December 27, 2024 and sell it today you would lose (198.00) from holding OFG Bancorp or give up 4.61% of portfolio value over 90 days.

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

OFG Bancorp  vs.  National Bank Holdings

OFG Bancorp

Risk-Adjusted Performance

Very Weak

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

National Bank Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Bank Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with OFG Bancorp and National Bank

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

The idea behind OFG Bancorp and National Bank Holdings 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.