Correlation Between National Bank and Canadian National
Can any of the company-specific risk be diversified away by investing in both National Bank and Canadian 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 Canadian 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 Canadian National Railway, you can compare the effects of market volatilities on National Bank and Canadian 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 Canadian National. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and Canadian National.
Diversification Opportunities for National Bank and Canadian National
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between National and Canadian is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and Canadian National Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian National Railway 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 Canadian National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian National Railway has no effect on the direction of National Bank i.e., National Bank and Canadian National go up and down completely randomly.
Pair Corralation between National Bank and Canadian National
Assuming the 90 days horizon National Bank of is expected to generate 0.44 times more return on investment than Canadian National. However, National Bank of is 2.25 times less risky than Canadian National. It trades about 0.37 of its potential returns per unit of risk. Canadian National Railway is currently generating about -0.05 per unit of risk. If you would invest 13,115 in National Bank of on August 24, 2024 and sell it today you would earn a total of 625.00 from holding National Bank of or generate 4.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Bank of vs. Canadian National Railway
Performance |
| Timeline |
| National Bank |
| Canadian National Railway |
National Bank and Canadian National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Bank and Canadian National
The main advantage of trading using opposite National Bank and Canadian National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank position performs unexpectedly, Canadian 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 Canadian National will offset losses from the drop in Canadian National's long position.| National Bank vs. Canadian Imperial Bank | National Bank vs. Bank of Montreal | National Bank vs. Royal Bank of | National Bank vs. Bank of Nova |
| Canadian National vs. Canadian Pacific Railway | Canadian National vs. Fortis Inc | Canadian National vs. BCE Inc | Canadian National vs. Telus Corp |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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