Correlation Between Richelieu Hardware and National Bank

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

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

Diversification Opportunities for Richelieu Hardware and National Bank

-0.25

Correlation Coefficient

Richelieu Hardware  National Bank

Very good diversification

The 3 months correlation between Richelieu and National is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Richelieu Hardware and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank and Richelieu Hardware 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 Richelieu Hardware 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 has no effect on the direction of Richelieu Hardware i.e., Richelieu Hardware and National Bank go up and down completely randomly.

Pair Corralation between Richelieu Hardware and National Bank

Assuming the 90 days trading horizon Richelieu Hardware is expected to under-perform the National Bank. In addition to that, Richelieu Hardware is 4.18 times more volatile than National Bank of. It trades about -0.12 of its total potential returns per unit of risk. National Bank of is currently generating about -0.02 per unit of volatility. If you would invest  2,611  in National Bank of on December 25, 2024 and sell it today you would lose (11.00) from holding National Bank of or give up 0.42% of portfolio value over 90 days.

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

Richelieu Hardware  vs.  National Bank of

Richelieu Hardware

Risk-Adjusted Performance

Very Weak

Over the last 90 days Richelieu Hardware 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 healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

National Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, National Bank is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Richelieu Hardware and National Bank

The main advantage of trading using opposite Richelieu Hardware and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Richelieu Hardware 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 Richelieu Hardware and National Bank 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.