Correlation Between National Bank and North American
Can any of the company-specific risk be diversified away by investing in both National Bank and North American 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 North American 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 North American Financial, you can compare the effects of market volatilities on National Bank and North American 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 North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and North American.
Diversification Opportunities for National Bank and North American
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between National and North is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and North American Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Financial 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Financial has no effect on the direction of National Bank i.e., National Bank and North American go up and down completely randomly.
Pair Corralation between National Bank and North American
Assuming the 90 days trading horizon National Bank of is expected to generate 0.51 times more return on investment than North American. However, National Bank of is 1.97 times less risky than North American. It trades about 0.19 of its potential returns per unit of risk. North American Financial is currently generating about -0.01 per unit of risk. If you would invest 2,411 in National Bank of on October 12, 2024 and sell it today you would earn a total of 83.00 from holding National Bank of or generate 3.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Bank of vs. North American Financial
Performance |
| Timeline |
| National Bank |
| North American Financial |
National Bank and North American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Bank and North American
The main advantage of trading using opposite National Bank and North American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank position performs unexpectedly, North American 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 North American will offset losses from the drop in North American's long position.| National Bank vs. Diamond Estates Wines | National Bank vs. Firan Technology Group | National Bank vs. AKITA Drilling | National Bank vs. Marimaca Copper Corp |
| North American vs. Dividend Growth Split | North American vs. Dividend 15 Split | North American vs. Financial 15 Split | North American vs. Dividend 15 Split |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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