Correlation Between Bancolombia and National Capital
Can any of the company-specific risk be diversified away by investing in both Bancolombia 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 Bancolombia and National Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bancolombia SA ADR and National Capital Bank, you can compare the effects of market volatilities on Bancolombia 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 Bancolombia with a short position of National Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bancolombia and National Capital.
Diversification Opportunities for Bancolombia and National Capital
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bancolombia and National is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Bancolombia SA ADR 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 Bancolombia 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 Bancolombia SA ADR 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 Bancolombia i.e., Bancolombia and National Capital go up and down completely randomly.
Pair Corralation between Bancolombia and National Capital
Considering the 90-day investment horizon Bancolombia is expected to generate 233.29 times less return on investment than National Capital. But when comparing it to its historical volatility, Bancolombia SA ADR is 84.92 times less risky than National Capital. It trades about 0.15 of its potential returns per unit of risk. National Capital Bank is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest 4,693 in National Capital Bank on August 30, 2024 and sell it today you would earn a total of 19,307 from holding National Capital Bank or generate 411.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
Bancolombia SA ADR vs. National Capital Bank
Performance |
| Timeline |
| Bancolombia SA ADR |
| National Capital Bank |
Bancolombia and National Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bancolombia and National Capital
The main advantage of trading using opposite Bancolombia and National Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bancolombia 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.| Bancolombia vs. Banco De Chile | Bancolombia vs. Banco Bradesco SA | Bancolombia vs. Banco Santander Chile | Bancolombia vs. Intercorp Financial Services |
| National Capital vs. Invesco High Income | National Capital vs. Blackrock Muniholdings Ny | National Capital vs. Nuveen California Select | National Capital vs. MFS Investment Grade |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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