Correlation Between QNB Corp and Exchange Bank

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

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

Diversification Opportunities for QNB Corp and Exchange Bank

0.37

Correlation Coefficient

QNB Corp  Exchange Bank

Weak diversification

The 3 months correlation between QNB and Exchange is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding QNB Corp and Exchange Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Bank and QNB Corp 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 QNB Corp are associated (or correlated) with Exchange Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Bank has no effect on the direction of QNB Corp i.e., QNB Corp and Exchange Bank go up and down completely randomly.

Pair Corralation between QNB Corp and Exchange Bank

Given the investment horizon of 90 days QNB Corp is expected to generate 0.73 times more return on investment than Exchange Bank. However, QNB Corp is 1.37 times less risky than Exchange Bank. It trades about 0.05 of its potential returns per unit of risk. Exchange Bank is currently generating about 0.02 per unit of risk. If you would invest  2,320  in QNB Corp on October 10, 2024 and sell it today you would earn a total of  1,080  from holding QNB Corp or generate 46.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.55%
Values	Daily Returns

QNB Corp  vs.  Exchange Bank

QNB Corp

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in QNB Corp are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental drivers, QNB Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Exchange Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Exchange Bank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Exchange Bank is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with QNB Corp and Exchange Bank

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

The idea behind QNB Corp and Exchange Bank 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.