Correlation Between National Bank and Spirent Communications
Can any of the company-specific risk be diversified away by investing in both National Bank and Spirent Communications 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 Spirent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Bank Holdings and Spirent Communications plc, you can compare the effects of market volatilities on National Bank and Spirent Communications 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 Spirent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and Spirent Communications.
Diversification Opportunities for National Bank and Spirent Communications
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between National and Spirent is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications 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 Holdings are associated (or correlated) with Spirent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirent Communications has no effect on the direction of National Bank i.e., National Bank and Spirent Communications go up and down completely randomly.
Pair Corralation between National Bank and Spirent Communications
Assuming the 90 days horizon National Bank Holdings is expected to generate 1.99 times more return on investment than Spirent Communications. However, National Bank is 1.99 times more volatile than Spirent Communications plc. It trades about 0.12 of its potential returns per unit of risk. Spirent Communications plc is currently generating about -0.02 per unit of risk. If you would invest 3,215 in National Bank Holdings on September 2, 2024 and sell it today you would earn a total of 1,265 from holding National Bank Holdings or generate 39.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Bank Holdings vs. Spirent Communications plc
Performance |
| Timeline |
| National Bank Holdings |
| Spirent Communications |
National Bank and Spirent Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Bank and Spirent Communications
The main advantage of trading using opposite National Bank and Spirent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank position performs unexpectedly, Spirent Communications 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 Spirent Communications will offset losses from the drop in Spirent Communications' long position.| National Bank vs. Eagle Materials | National Bank vs. Plastic Omnium | National Bank vs. SANOK RUBBER ZY | National Bank vs. Mitsubishi Materials |
| Spirent Communications vs. Deutsche Telekom AG | Spirent Communications vs. Superior Plus Corp | Spirent Communications vs. NMI Holdings | Spirent Communications vs. Origin Agritech |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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