Correlation Between National Bank and First National
Can any of the company-specific risk be diversified away by investing in both National Bank and First National 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 First National 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 First National Financial, you can compare the effects of market volatilities on National Bank and First National 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 First National. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and First National.
Diversification Opportunities for National Bank and First National
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between National and First is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and First National Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National 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 First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Financial has no effect on the direction of National Bank i.e., National Bank and First National go up and down completely randomly.
Pair Corralation between National Bank and First National
Assuming the 90 days trading horizon National Bank is expected to generate 1.12 times less return on investment than First National. But when comparing it to its historical volatility, National Bank of is 1.32 times less risky than First National. It trades about 0.2 of its potential returns per unit of risk. First National Financial is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,401 in First National Financial on August 29, 2024 and sell it today you would earn a total of 67.00 from holding First National Financial or generate 4.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Bank of vs. First National Financial
Performance |
| Timeline |
| National Bank |
| First National Financial |
National Bank and First National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Bank and First National
The main advantage of trading using opposite National Bank and First National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank position performs unexpectedly, First National 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 First National will offset losses from the drop in First National's long position.| National Bank vs. Caribbean Utilities | National Bank vs. Medical Facilities | National Bank vs. Tree Island Steel | National Bank vs. Broadcom |
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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