Correlation Between Public Power and National Bank

Can any of the company-specific risk be diversified away by investing in both Public Power 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 Public Power and National Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Public Power and National Bank of, you can compare the effects of market volatilities on Public Power 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 Public Power with a short position of National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Public Power and National Bank.

Diversification Opportunities for Public Power and National Bank

0.08

Correlation Coefficient

Public Power  National Bank

Significant diversification

The 3 months correlation between Public and National is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Public Power and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank and Public Power 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 Public Power 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 has no effect on the direction of Public Power i.e., Public Power and National Bank go up and down completely randomly.

Pair Corralation between Public Power and National Bank

Assuming the 90 days trading horizon Public Power is expected to generate 4.3 times less return on investment than National Bank. But when comparing it to its historical volatility, Public Power is 1.3 times less risky than National Bank. It trades about 0.1 of its potential returns per unit of risk. National Bank of is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  767.00  in National Bank of on February 28, 2024 and sell it today you would earn a total of  82.00  from holding National Bank of or generate 10.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Public Power  vs.  National Bank of

Public Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Public Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Public Power is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

National Bank

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank of are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, National Bank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Public Power and National Bank

The main advantage of trading using opposite Public Power and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Public Power 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.

The idea behind Public Power and National Bank of 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.

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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.