Correlation Between FDH BANK and NBS BANK
Can any of the company-specific risk be diversified away by investing in both FDH BANK and NBS 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 FDH BANK and NBS BANK into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FDH BANK PLC and NBS BANK LIMITED, you can compare the effects of market volatilities on FDH BANK and NBS 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 FDH BANK with a short position of NBS BANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of FDH BANK and NBS BANK.
Diversification Opportunities for FDH BANK and NBS BANK
Poor diversification
The 3 months correlation between FDH and NBS is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding FDH BANK PLC and NBS BANK LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NBS BANK LIMITED and FDH BANK 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 FDH BANK PLC are associated (or correlated) with NBS BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NBS BANK LIMITED has no effect on the direction of FDH BANK i.e., FDH BANK and NBS BANK go up and down completely randomly.
Pair Corralation between FDH BANK and NBS BANK
Assuming the 90 days trading horizon FDH BANK PLC is expected to generate 83.01 times more return on investment than NBS BANK. However, FDH BANK is 83.01 times more volatile than NBS BANK LIMITED. It trades about 0.41 of its potential returns per unit of risk. NBS BANK LIMITED is currently generating about -0.04 per unit of risk. If you would invest 20,763 in FDH BANK PLC on November 28, 2024 and sell it today you would earn a total of 10,740 from holding FDH BANK PLC or generate 51.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FDH BANK PLC vs. NBS BANK LIMITED
Performance |
| Timeline |
| FDH BANK PLC |
| NBS BANK LIMITED |
FDH BANK and NBS BANK Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FDH BANK and NBS BANK
The main advantage of trading using opposite FDH BANK and NBS BANK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FDH BANK position performs unexpectedly, NBS 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 NBS BANK will offset losses from the drop in NBS BANK's long position.The idea behind FDH BANK PLC and NBS BANK LIMITED 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.| NBS BANK vs. NATIONAL INVESTMENT TRUST | NBS BANK vs. MALAWI PROPERTY INVESTMENT | NBS BANK vs. NATIONAL BANK OF | NBS BANK vs. FDH BANK PLC |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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