Correlation Between Highlight Communications and National Bank
Can any of the company-specific risk be diversified away by investing in both Highlight Communications 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 Highlight Communications and National Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Highlight Communications AG and National Bank Holdings, you can compare the effects of market volatilities on Highlight Communications 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 Highlight Communications with a short position of National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highlight Communications and National Bank.
Diversification Opportunities for Highlight Communications and National Bank
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Highlight and National is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications AG 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 Highlight Communications 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 Highlight Communications AG 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 Highlight Communications i.e., Highlight Communications and National Bank go up and down completely randomly.
Pair Corralation between Highlight Communications and National Bank
Assuming the 90 days trading horizon Highlight Communications AG is expected to generate 3.26 times more return on investment than National Bank. However, Highlight Communications is 3.26 times more volatile than National Bank Holdings. It trades about 0.02 of its potential returns per unit of risk. National Bank Holdings is currently generating about -0.14 per unit of risk. If you would invest 112.00 in Highlight Communications AG on November 27, 2024 and sell it today you would lose (1.00) from holding Highlight Communications AG or give up 0.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Highlight Communications AG vs. National Bank Holdings
Performance |
| Timeline |
| Highlight Communications |
| National Bank Holdings |
Highlight Communications and National Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highlight Communications and National Bank
The main advantage of trading using opposite Highlight Communications and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highlight Communications 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.The idea behind Highlight Communications AG and National Bank Holdings 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.
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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