Correlation Between PSB Holdings and National Capital
Can any of the company-specific risk be diversified away by investing in both PSB Holdings and National Capital 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 PSB Holdings and National Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PSB Holdings and National Capital Bank, you can compare the effects of market volatilities on PSB Holdings and National Capital 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 PSB Holdings with a short position of National Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of PSB Holdings and National Capital.
Diversification Opportunities for PSB Holdings and National Capital
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PSB and National is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding PSB Holdings and National Capital Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Capital Bank and PSB Holdings 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 PSB Holdings are associated (or correlated) with National Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Capital Bank has no effect on the direction of PSB Holdings i.e., PSB Holdings and National Capital go up and down completely randomly.
Pair Corralation between PSB Holdings and National Capital
Given the investment horizon of 90 days PSB Holdings is expected to generate 4.73 times less return on investment than National Capital. But when comparing it to its historical volatility, PSB Holdings is 4.17 times less risky than National Capital. It trades about 0.3 of its potential returns per unit of risk. National Capital Bank is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 19,880 in National Capital Bank on August 26, 2024 and sell it today you would earn a total of 7,020 from holding National Capital Bank or generate 35.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
PSB Holdings vs. National Capital Bank
Performance |
| Timeline |
| PSB Holdings |
| National Capital Bank |
PSB Holdings and National Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PSB Holdings and National Capital
The main advantage of trading using opposite PSB Holdings and National Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PSB Holdings position performs unexpectedly, National Capital 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 Capital will offset losses from the drop in National Capital's long position.| PSB Holdings vs. Invesco High Income | PSB Holdings vs. Blackrock Muniholdings Ny | PSB Holdings vs. MFS Investment Grade | PSB Holdings vs. Federated Premier Municipal |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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