Correlation Between National Bank and Reliance Insurance
Can any of the company-specific risk be diversified away by investing in both National Bank and Reliance Insurance 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 Reliance Insurance 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 Reliance Insurance Co, you can compare the effects of market volatilities on National Bank and Reliance Insurance 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 Reliance Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and Reliance Insurance.
Diversification Opportunities for National Bank and Reliance Insurance
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between National and Reliance is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and Reliance Insurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Insurance 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 Reliance Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Insurance has no effect on the direction of National Bank i.e., National Bank and Reliance Insurance go up and down completely randomly.
Pair Corralation between National Bank and Reliance Insurance
Assuming the 90 days trading horizon National Bank is expected to generate 2.04 times less return on investment than Reliance Insurance. But when comparing it to its historical volatility, National Bank of is 2.39 times less risky than Reliance Insurance. It trades about 0.1 of its potential returns per unit of risk. Reliance Insurance Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 504.00 in Reliance Insurance Co on August 25, 2024 and sell it today you would earn a total of 696.00 from holding Reliance Insurance Co or generate 138.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 60.29% |
| Values | Daily Returns |
National Bank of vs. Reliance Insurance Co
Performance |
| Timeline |
| National Bank |
| Reliance Insurance |
National Bank and Reliance Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Bank and Reliance Insurance
The main advantage of trading using opposite National Bank and Reliance Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank position performs unexpectedly, Reliance Insurance 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 Reliance Insurance will offset losses from the drop in Reliance Insurance's long position.| National Bank vs. Masood Textile Mills | National Bank vs. Fauji Foods | National Bank vs. KSB Pumps | National Bank vs. Mari Petroleum |
| Reliance Insurance vs. Habib Bank | Reliance Insurance vs. National Bank of | Reliance Insurance vs. United Bank | Reliance Insurance vs. MCB Bank |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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