Correlation Between Compagnie and National Bank
Can any of the company-specific risk be diversified away by investing in both Compagnie 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 Compagnie and National Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compagnie de Saint Gobain and National Bank Holdings, you can compare the effects of market volatilities on Compagnie 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 Compagnie with a short position of National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie and National Bank.
Diversification Opportunities for Compagnie and National Bank
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Compagnie and National is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de Saint Gobain 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 Compagnie 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 Compagnie de Saint Gobain 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 Compagnie i.e., Compagnie and National Bank go up and down completely randomly.
Pair Corralation between Compagnie and National Bank
Assuming the 90 days horizon Compagnie is expected to generate 2.26 times less return on investment than National Bank. But when comparing it to its historical volatility, Compagnie de Saint Gobain is 2.14 times less risky than National Bank. It trades about 0.13 of its potential returns per unit of risk. National Bank Holdings is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 4,094 in National Bank Holdings on September 1, 2024 and sell it today you would earn a total of 377.00 from holding National Bank Holdings or generate 9.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Compagnie de Saint Gobain vs. National Bank Holdings
Performance |
| Timeline |
| Compagnie de Saint |
| National Bank Holdings |
Compagnie and National Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compagnie and National Bank
The main advantage of trading using opposite Compagnie and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie 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.| Compagnie vs. Media and Games | Compagnie vs. CODERE ONLINE LUX | Compagnie vs. Zoom Video Communications | Compagnie vs. GungHo Online Entertainment |
| National Bank vs. HomeToGo SE | National Bank vs. Autohome ADR | National Bank vs. CENTURIA OFFICE REIT | National Bank vs. American Homes 4 |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk |