Correlation Between National Bank and CDN IMPERIAL
Can any of the company-specific risk be diversified away by investing in both National Bank and CDN IMPERIAL 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 CDN IMPERIAL 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 CDN IMPERIAL BANK, you can compare the effects of market volatilities on National Bank and CDN IMPERIAL 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 CDN IMPERIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and CDN IMPERIAL.
Diversification Opportunities for National Bank and CDN IMPERIAL
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between National and CDN is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and CDN IMPERIAL BANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDN IMPERIAL BANK 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 CDN IMPERIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDN IMPERIAL BANK has no effect on the direction of National Bank i.e., National Bank and CDN IMPERIAL go up and down completely randomly.
Pair Corralation between National Bank and CDN IMPERIAL
Assuming the 90 days horizon National Bank Holdings is expected to generate 3.84 times more return on investment than CDN IMPERIAL. However, National Bank is 3.84 times more volatile than CDN IMPERIAL BANK. It trades about 0.14 of its potential returns per unit of risk. CDN IMPERIAL BANK is currently generating about 0.33 per unit of risk. If you would invest 4,094 in National Bank Holdings on September 1, 2024 and sell it today you would earn a total of 377.00 from holding National Bank Holdings or generate 9.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Bank Holdings vs. CDN IMPERIAL BANK
Performance |
| Timeline |
| National Bank Holdings |
| CDN IMPERIAL BANK |
National Bank and CDN IMPERIAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Bank and CDN IMPERIAL
The main advantage of trading using opposite National Bank and CDN IMPERIAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank position performs unexpectedly, CDN IMPERIAL 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 CDN IMPERIAL will offset losses from the drop in CDN IMPERIAL's long position.| National Bank vs. HomeToGo SE | National Bank vs. Autohome ADR | National Bank vs. CENTURIA OFFICE REIT | National Bank vs. American Homes 4 |
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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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