Correlation Between Plastic Omnium and National Bank
Can any of the company-specific risk be diversified away by investing in both Plastic Omnium 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 Plastic Omnium and National Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Plastic Omnium and National Bank Holdings, you can compare the effects of market volatilities on Plastic Omnium 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 Plastic Omnium with a short position of National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plastic Omnium and National Bank.
Diversification Opportunities for Plastic Omnium and National Bank
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Plastic and National is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Plastic Omnium 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 Plastic Omnium 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 Plastic Omnium 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 Plastic Omnium i.e., Plastic Omnium and National Bank go up and down completely randomly.
Pair Corralation between Plastic Omnium and National Bank
Assuming the 90 days trading horizon Plastic Omnium is expected to under-perform the National Bank. In addition to that, Plastic Omnium is 1.15 times more volatile than National Bank Holdings. It trades about -0.05 of its total potential returns per unit of risk. National Bank Holdings is currently generating about 0.12 per unit of volatility. If you would invest 3,215 in National Bank Holdings on September 3, 2024 and sell it today you would earn a total of 1,205 from holding National Bank Holdings or generate 37.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Plastic Omnium vs. National Bank Holdings
Performance |
| Timeline |
| Plastic Omnium |
| National Bank Holdings |
Plastic Omnium and National Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Plastic Omnium and National Bank
The main advantage of trading using opposite Plastic Omnium and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plastic Omnium 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.| Plastic Omnium vs. Apple Inc | Plastic Omnium vs. Apple Inc | Plastic Omnium vs. Apple Inc | Plastic Omnium vs. Apple Inc |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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