Correlation Between Citrus Leisure and National Development

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

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

Diversification Opportunities for Citrus Leisure and National Development

-0.05

Correlation Coefficient

Citrus Leisure  National Development

Good diversification

The 3 months correlation between Citrus and National is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Citrus Leisure PLC and National Development Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Development Bank and Citrus Leisure 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 Citrus Leisure PLC are associated (or correlated) with National Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Development Bank has no effect on the direction of Citrus Leisure i.e., Citrus Leisure and National Development go up and down completely randomly.

Pair Corralation between Citrus Leisure and National Development

Assuming the 90 days trading horizon Citrus Leisure is expected to generate 10.71 times less return on investment than National Development. In addition to that, Citrus Leisure is 1.82 times more volatile than National Development Bank. It trades about 0.01 of its total potential returns per unit of risk. National Development Bank is currently generating about 0.28 per unit of volatility. If you would invest  6,620  in National Development Bank on September 18, 2024 and sell it today you would earn a total of  1,970  from holding National Development Bank or generate 29.76% return on investment over 90 days.

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

Citrus Leisure PLC  vs.  National Development Bank

Citrus Leisure PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citrus Leisure PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Citrus Leisure is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

National Development Bank

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in National Development Bank are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, National Development sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citrus Leisure and National Development

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

The idea behind Citrus Leisure PLC and National Development 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.