Correlation Between NBT and Settlebank
Can any of the company-specific risk be diversified away by investing in both NBT and Settlebank 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 NBT and Settlebank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NBT Inc and Settlebank, you can compare the effects of market volatilities on NBT and Settlebank 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 NBT with a short position of Settlebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of NBT and Settlebank.
Diversification Opportunities for NBT and Settlebank
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NBT and Settlebank is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding NBT Inc and Settlebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Settlebank and NBT 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 NBT Inc are associated (or correlated) with Settlebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Settlebank has no effect on the direction of NBT i.e., NBT and Settlebank go up and down completely randomly.
Pair Corralation between NBT and Settlebank
Assuming the 90 days trading horizon NBT Inc is expected to under-perform the Settlebank. In addition to that, NBT is 1.18 times more volatile than Settlebank. It trades about -0.01 of its total potential returns per unit of risk. Settlebank is currently generating about 0.0 per unit of volatility. If you would invest 1,782,652 in Settlebank on August 31, 2024 and sell it today you would lose (281,652) from holding Settlebank or give up 15.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.74% |
| Values | Daily Returns |
NBT Inc vs. Settlebank
Performance |
| Timeline |
| NBT Inc |
| Settlebank |
NBT and Settlebank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NBT and Settlebank
The main advantage of trading using opposite NBT and Settlebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NBT position performs unexpectedly, Settlebank 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 Settlebank will offset losses from the drop in Settlebank's long position.The idea behind NBT Inc and Settlebank 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.| Settlebank vs. Daishin Information Communications | Settlebank vs. Busan Industrial Co | Settlebank vs. Busan Ind | Settlebank vs. Mirae Asset Daewoo |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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