Correlation Between Pinnacle Financial and National Bank
Can any of the company-specific risk be diversified away by investing in both Pinnacle Financial and National Bank 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 Pinnacle Financial and National Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pinnacle Financial Partners and National Bank Holdings, you can compare the effects of market volatilities on Pinnacle Financial and National Bank 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 Pinnacle Financial with a short position of National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pinnacle Financial and National Bank.
Diversification Opportunities for Pinnacle Financial and National Bank
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Pinnacle and National is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Pinnacle Financial Partners and National Bank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank Holdings and Pinnacle 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 Pinnacle Financial Partners are associated (or correlated) with National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank Holdings has no effect on the direction of Pinnacle Financial i.e., Pinnacle Financial and National Bank go up and down completely randomly.
Pair Corralation between Pinnacle Financial and National Bank
Given the investment horizon of 90 days Pinnacle Financial Partners is expected to generate 1.1 times more return on investment than National Bank. However, Pinnacle Financial is 1.1 times more volatile than National Bank Holdings. It trades about 0.27 of its potential returns per unit of risk. National Bank Holdings is currently generating about 0.11 per unit of risk. If you would invest 10,373 in Pinnacle Financial Partners on August 29, 2024 and sell it today you would earn a total of 2,452 from holding Pinnacle Financial Partners or generate 23.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pinnacle Financial Partners vs. National Bank Holdings
Performance |
| Timeline |
| Pinnacle Financial |
| National Bank Holdings |
Pinnacle Financial and National Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pinnacle Financial and National Bank
The main advantage of trading using opposite Pinnacle Financial and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pinnacle Financial position performs unexpectedly, National Bank 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 National Bank will offset losses from the drop in National Bank's long position.| Pinnacle Financial vs. Wintrust Financial | Pinnacle Financial vs. Renasant | Pinnacle Financial vs. Texas Capital Bancshares | Pinnacle Financial vs. Home BancShares |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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