Correlation Between National Bankshares and QCR Holdings
Can any of the company-specific risk be diversified away by investing in both National Bankshares and QCR Holdings 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 Bankshares and QCR Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Bankshares and QCR Holdings, you can compare the effects of market volatilities on National Bankshares and QCR Holdings 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 Bankshares with a short position of QCR Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bankshares and QCR Holdings.
Diversification Opportunities for National Bankshares and QCR Holdings
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between National and QCR is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding National Bankshares and QCR Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QCR Holdings and National Bankshares 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 Bankshares are associated (or correlated) with QCR Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QCR Holdings has no effect on the direction of National Bankshares i.e., National Bankshares and QCR Holdings go up and down completely randomly.
Pair Corralation between National Bankshares and QCR Holdings
Given the investment horizon of 90 days National Bankshares is expected to generate 1.99 times less return on investment than QCR Holdings. But when comparing it to its historical volatility, National Bankshares is 1.34 times less risky than QCR Holdings. It trades about 0.15 of its potential returns per unit of risk. QCR Holdings is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 8,109 in QCR Holdings on August 30, 2024 and sell it today you would earn a total of 1,242 from holding QCR Holdings or generate 15.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
National Bankshares vs. QCR Holdings
Performance |
| Timeline |
| National Bankshares |
| QCR Holdings |
National Bankshares and QCR Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Bankshares and QCR Holdings
The main advantage of trading using opposite National Bankshares and QCR Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bankshares position performs unexpectedly, QCR Holdings 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 QCR Holdings will offset losses from the drop in QCR Holdings' long position.| National Bankshares vs. Finward Bancorp | National Bankshares vs. Community West Bancshares | National Bankshares vs. First Financial Northwest | National Bankshares vs. Oak Valley Bancorp |
| QCR Holdings vs. Community West Bancshares | QCR Holdings vs. First Financial Northwest | QCR Holdings vs. CF Bankshares | QCR Holdings vs. Home Federal 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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