Correlation Between First National and National Bank
Can any of the company-specific risk be diversified away by investing in both First National 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 First National and National Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First National Financial and National Bank of, you can compare the effects of market volatilities on First National 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 First National with a short position of National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of First National and National Bank.
Diversification Opportunities for First National and National Bank
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and National is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding First National Financial and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank and First National 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 First National Financial 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 First National i.e., First National and National Bank go up and down completely randomly.
Pair Corralation between First National and National Bank
Assuming the 90 days trading horizon First National Financial is expected to under-perform the National Bank. In addition to that, First National is 23.8 times more volatile than National Bank of. It trades about -0.06 of its total potential returns per unit of risk. National Bank of is currently generating about 0.03 per unit of volatility. If you would invest 2,496 in National Bank of on November 4, 2024 and sell it today you would earn a total of 1.00 from holding National Bank of or generate 0.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First National Financial vs. National Bank of
Performance |
| Timeline |
| First National Financial |
| National Bank |
First National and National Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First National and National Bank
The main advantage of trading using opposite First National and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First National 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.| First National vs. Berkshire Hathaway CDR | First National vs. Apple Inc CDR | First National vs. Microsoft Corp CDR | First National vs. Alphabet Inc CDR |
| National Bank vs. Berkshire Hathaway CDR | National Bank vs. Apple Inc CDR | National Bank vs. Microsoft Corp CDR | National Bank vs. Alphabet Inc CDR |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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