Correlation Between National Bank and Regions Financial
Can any of the company-specific risk be diversified away by investing in both National Bank and Regions Financial 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 Regions Financial 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 Regions Financial, you can compare the effects of market volatilities on National Bank and Regions Financial 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 Regions Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and Regions Financial.
Diversification Opportunities for National Bank and Regions Financial
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between National and Regions is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and Regions Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regions 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 Holdings are associated (or correlated) with Regions Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regions Financial has no effect on the direction of National Bank i.e., National Bank and Regions Financial go up and down completely randomly.
Pair Corralation between National Bank and Regions Financial
Given the investment horizon of 90 days National Bank is expected to generate 1.71 times less return on investment than Regions Financial. In addition to that, National Bank is 1.23 times more volatile than Regions Financial. It trades about 0.11 of its total potential returns per unit of risk. Regions Financial is currently generating about 0.22 per unit of volatility. If you would invest 2,406 in Regions Financial on August 29, 2024 and sell it today you would earn a total of 329.00 from holding Regions Financial or generate 13.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Bank Holdings vs. Regions Financial
Performance |
| Timeline |
| National Bank Holdings |
| Regions Financial |
National Bank and Regions Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Bank and Regions Financial
The main advantage of trading using opposite National Bank and Regions Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank position performs unexpectedly, Regions Financial 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 Regions Financial will offset losses from the drop in Regions Financial's long position.The idea behind National Bank Holdings and Regions Financial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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