Correlation Between Truxton and National Capital

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

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

Diversification Opportunities for Truxton and National Capital

0.02

Correlation Coefficient

Truxton  National Capital

Significant diversification

The 3 months correlation between Truxton and National is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Truxton and National Capital Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Capital Bank and Truxton 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 Truxton are associated (or correlated) with National Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Capital Bank has no effect on the direction of Truxton i.e., Truxton and National Capital go up and down completely randomly.

Pair Corralation between Truxton and National Capital

Given the investment horizon of 90 days Truxton is expected to generate 0.51 times more return on investment than National Capital. However, Truxton is 1.97 times less risky than National Capital. It trades about 0.03 of its potential returns per unit of risk. National Capital Bank is currently generating about -0.02 per unit of risk. If you would invest  7,240  in Truxton on December 22, 2024 and sell it today you would earn a total of  158.00  from holding Truxton or generate 2.18% return on investment over 90 days.

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

Truxton  vs.  National Capital Bank

Truxton

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Truxton are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Truxton is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

National Capital Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Capital Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, National Capital is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Truxton and National Capital

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

The idea behind Truxton and National Capital 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.