Correlation Between Flight Centre and National Bank
Can any of the company-specific risk be diversified away by investing in both Flight Centre 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 Flight Centre and National Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Flight Centre Travel and National Bank Holdings, you can compare the effects of market volatilities on Flight Centre 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 Flight Centre with a short position of National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flight Centre and National Bank.
Diversification Opportunities for Flight Centre and National Bank
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Flight and National is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Flight Centre Travel 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 Flight Centre 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 Flight Centre Travel 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 Flight Centre i.e., Flight Centre and National Bank go up and down completely randomly.
Pair Corralation between Flight Centre and National Bank
Assuming the 90 days horizon Flight Centre is expected to generate 1.2 times less return on investment than National Bank. But when comparing it to its historical volatility, Flight Centre Travel is 1.11 times less risky than National Bank. It trades about 0.02 of its potential returns per unit of risk. National Bank Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 3,691 in National Bank Holdings on September 14, 2024 and sell it today you would earn a total of 649.00 from holding National Bank Holdings or generate 17.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Flight Centre Travel vs. National Bank Holdings
Performance |
| Timeline |
| Flight Centre Travel |
| National Bank Holdings |
Flight Centre and National Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Flight Centre and National Bank
The main advantage of trading using opposite Flight Centre and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flight Centre 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.| Flight Centre vs. National Bank Holdings | Flight Centre vs. SANOK RUBBER ZY | Flight Centre vs. Rayonier Advanced Materials | Flight Centre vs. GOODYEAR T RUBBER |
| National Bank vs. Fifth Third Bancorp | National Bank vs. Regions Financial | National Bank vs. Superior Plus Corp | National Bank vs. SIVERS SEMICONDUCTORS AB |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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