Correlation Between River and National Bank

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

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

Diversification Opportunities for River and National Bank

0.0

Correlation Coefficient

River  National Bank

Pay attention - limited upside

The 3 months correlation between River and National is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding River and Mercantile and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank and River 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 River and Mercantile 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 River i.e., River and National Bank go up and down completely randomly.

Pair Corralation between River and National Bank

Assuming the 90 days trading horizon River and Mercantile is expected to under-perform the National Bank. But the stock apears to be less risky and, when comparing its historical volatility, River and Mercantile is 329.77 times less risky than National Bank. The stock trades about -0.23 of its potential returns per unit of risk. The National Bank of is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  278.00  in National Bank of on October 5, 2024 and sell it today you would earn a total of  0.00  from holding National Bank of or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

River and Mercantile  vs.  National Bank of

River and Mercantile

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in River and Mercantile are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, River is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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. In spite of comparatively stable basic indicators, National Bank is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with River and National Bank

The main advantage of trading using opposite River and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if River 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 River and Mercantile 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.