Correlation Between National Bank and Red River
Can any of the company-specific risk be diversified away by investing in both National Bank and Red River 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 Red River 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 Red River Bancshares, you can compare the effects of market volatilities on National Bank and Red River 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 Red River. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and Red River.
Diversification Opportunities for National Bank and Red River
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between National and Red is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and Red River Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red River Bancshares 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 Red River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red River Bancshares has no effect on the direction of National Bank i.e., National Bank and Red River go up and down completely randomly.
Pair Corralation between National Bank and Red River
Given the investment horizon of 90 days National Bank Holdings is expected to generate 0.88 times more return on investment than Red River. However, National Bank Holdings is 1.14 times less risky than Red River. It trades about 0.07 of its potential returns per unit of risk. Red River Bancshares is currently generating about -0.17 per unit of risk. If you would invest 4,338 in National Bank Holdings on October 24, 2024 and sell it today you would earn a total of 71.00 from holding National Bank Holdings or generate 1.64% 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. Red River Bancshares
Performance |
| Timeline |
| National Bank Holdings |
| Red River Bancshares |
National Bank and Red River Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Bank and Red River
The main advantage of trading using opposite National Bank and Red River positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank position performs unexpectedly, Red River 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 Red River will offset losses from the drop in Red River's long position.| National Bank vs. First Community | National Bank vs. Community West Bancshares | National Bank vs. First Financial Northwest | National Bank vs. First Northwest Bancorp |
| Red River vs. Home Federal Bancorp | Red River vs. Magyar Bancorp | Red River vs. Community West Bancshares | Red River vs. Rhinebeck Bancorp |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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