Correlation Between UNITED UTILITIES and National Bank

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

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

Diversification Opportunities for UNITED UTILITIES and National Bank

0.67

Correlation Coefficient

UNITED UTILITIES  National Bank

Poor diversification

The 3 months correlation between UNITED and National is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding UNITED UTILITIES GR and National Bank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank Holdings and UNITED UTILITIES 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 UNITED UTILITIES GR 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 Holdings has no effect on the direction of UNITED UTILITIES i.e., UNITED UTILITIES and National Bank go up and down completely randomly.

Pair Corralation between UNITED UTILITIES and National Bank

Assuming the 90 days trading horizon UNITED UTILITIES is expected to generate 2.99 times less return on investment than National Bank. But when comparing it to its historical volatility, UNITED UTILITIES GR is 1.38 times less risky than National Bank. It trades about 0.03 of its potential returns per unit of risk. National Bank Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,043  in National Bank Holdings on October 7, 2024 and sell it today you would earn a total of  957.00  from holding National Bank Holdings or generate 31.45% return on investment over 90 days.

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

UNITED UTILITIES GR  vs.  National Bank Holdings

UNITED UTILITIES

Risk-Adjusted Performance

5 of 100

Modest

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

National Bank Holdings

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, National Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with UNITED UTILITIES and National Bank

The main advantage of trading using opposite UNITED UTILITIES and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UNITED UTILITIES 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 UNITED UTILITIES GR and National Bank Holdings 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.