Correlation Between Brompton European and National Bank
Can any of the company-specific risk be diversified away by investing in both Brompton European 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 Brompton European and National Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brompton European Dividend and National Bank of, you can compare the effects of market volatilities on Brompton European 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 Brompton European with a short position of National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brompton European and National Bank.
Diversification Opportunities for Brompton European and National Bank
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Brompton and National is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Brompton European Dividend and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank and Brompton European 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 Brompton European Dividend 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 Brompton European i.e., Brompton European and National Bank go up and down completely randomly.
Pair Corralation between Brompton European and National Bank
Assuming the 90 days trading horizon Brompton European Dividend is expected to under-perform the National Bank. In addition to that, Brompton European is 6.17 times more volatile than National Bank of. It trades about 0.0 of its total potential returns per unit of risk. National Bank of is currently generating about 0.14 per unit of volatility. If you would invest 2,470 in National Bank of on September 3, 2024 and sell it today you would earn a total of 18.00 from holding National Bank of or generate 0.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brompton European Dividend vs. National Bank of
Performance |
| Timeline |
| Brompton European |
| National Bank |
Brompton European and National Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brompton European and National Bank
The main advantage of trading using opposite Brompton European and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brompton European 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.| Brompton European vs. Brompton Global Dividend | Brompton European vs. Global Healthcare Income | Brompton European vs. Tech Leaders Income | Brompton European vs. Brompton North American |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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