Correlation Between National Bank and Western Energy
Can any of the company-specific risk be diversified away by investing in both National Bank and Western Energy 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 National Bank and Western Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Bank of and Western Energy Services, you can compare the effects of market volatilities on National Bank and Western Energy 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 National Bank with a short position of Western Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and Western Energy.
Diversification Opportunities for National Bank and Western Energy
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between National and Western is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and Western Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Energy Services and National 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 National Bank of are associated (or correlated) with Western Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Energy Services has no effect on the direction of National Bank i.e., National Bank and Western Energy go up and down completely randomly.
Pair Corralation between National Bank and Western Energy
Assuming the 90 days trading horizon National Bank is expected to generate 1.88 times less return on investment than Western Energy. But when comparing it to its historical volatility, National Bank of is 10.98 times less risky than Western Energy. It trades about 0.16 of its potential returns per unit of risk. Western Energy Services is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 265.00 in Western Energy Services on August 30, 2024 and sell it today you would earn a total of 4.00 from holding Western Energy Services or generate 1.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
National Bank of vs. Western Energy Services
Performance |
| Timeline |
| National Bank |
| Western Energy Services |
National Bank and Western Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Bank and Western Energy
The main advantage of trading using opposite National Bank and Western Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank position performs unexpectedly, Western Energy 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 Western Energy will offset losses from the drop in Western Energy's long position.| National Bank vs. Canso Select Opportunities | National Bank vs. Wishpond Technologies | National Bank vs. Xtract One Technologies | National Bank vs. Ocumetics Technology Corp |
| Western Energy vs. Total Energy Services | Western Energy vs. PHX Energy Services | Western Energy vs. Calfrac Well Services |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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