Correlation Between Nmb Financial and Bank of Utica
Can any of the company-specific risk be diversified away by investing in both Nmb Financial and Bank of Utica 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 Nmb Financial and Bank of Utica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nmb Financial Corp and Bank of Utica, you can compare the effects of market volatilities on Nmb Financial and Bank of Utica 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 Nmb Financial with a short position of Bank of Utica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nmb Financial and Bank of Utica.
Diversification Opportunities for Nmb Financial and Bank of Utica
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nmb and Bank is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Nmb Financial Corp and Bank of Utica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Utica and Nmb Financial 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 Nmb Financial Corp are associated (or correlated) with Bank of Utica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Utica has no effect on the direction of Nmb Financial i.e., Nmb Financial and Bank of Utica go up and down completely randomly.
Pair Corralation between Nmb Financial and Bank of Utica
Given the investment horizon of 90 days Nmb Financial Corp is expected to generate 1.71 times more return on investment than Bank of Utica. However, Nmb Financial is 1.71 times more volatile than Bank of Utica. It trades about 0.3 of its potential returns per unit of risk. Bank of Utica is currently generating about 0.28 per unit of risk. If you would invest 1,165 in Nmb Financial Corp on August 30, 2024 and sell it today you would earn a total of 235.00 from holding Nmb Financial Corp or generate 20.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nmb Financial Corp vs. Bank of Utica
Performance |
| Timeline |
| Nmb Financial Corp |
| Bank of Utica |
Nmb Financial and Bank of Utica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nmb Financial and Bank of Utica
The main advantage of trading using opposite Nmb Financial and Bank of Utica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nmb Financial position performs unexpectedly, Bank of Utica 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 Bank of Utica will offset losses from the drop in Bank of Utica's long position.The idea behind Nmb Financial Corp and Bank of Utica 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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