Correlation Between National Bank and Diamond Estates
Can any of the company-specific risk be diversified away by investing in both National Bank and Diamond Estates 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 Diamond Estates 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 Diamond Estates Wines, you can compare the effects of market volatilities on National Bank and Diamond Estates 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 Diamond Estates. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and Diamond Estates.
Diversification Opportunities for National Bank and Diamond Estates
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between National and Diamond is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and Diamond Estates Wines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Estates Wines 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 Diamond Estates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Estates Wines has no effect on the direction of National Bank i.e., National Bank and Diamond Estates go up and down completely randomly.
Pair Corralation between National Bank and Diamond Estates
Assuming the 90 days trading horizon National Bank of is expected to generate 0.03 times more return on investment than Diamond Estates. However, National Bank of is 34.4 times less risky than Diamond Estates. It trades about 0.18 of its potential returns per unit of risk. Diamond Estates Wines is currently generating about -0.05 per unit of risk. If you would invest 2,487 in National Bank of on November 3, 2024 and sell it today you would earn a total of 10.00 from holding National Bank of or generate 0.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Bank of vs. Diamond Estates Wines
Performance |
| Timeline |
| National Bank |
| Diamond Estates Wines |
National Bank and Diamond Estates Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Bank and Diamond Estates
The main advantage of trading using opposite National Bank and Diamond Estates positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank position performs unexpectedly, Diamond Estates 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 Diamond Estates will offset losses from the drop in Diamond Estates' long position.| National Bank vs. Leading Edge Materials | National Bank vs. Canadian Utilities Limited | National Bank vs. Costco Wholesale Corp | National Bank vs. Algonquin Power Utilities |
| Diamond Estates vs. Goodfood Market Corp | Diamond Estates vs. CNJ Capital Investments | Diamond Estates vs. Atrium Mortgage Investment | Diamond Estates vs. High Liner Foods |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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