Correlation Between Caixabank and Nmb Financial

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

By analyzing existing cross correlation between Caixabank SA ADR and Nmb Financial Corp, you can compare the effects of market volatilities on Caixabank and Nmb Financial 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 Caixabank with a short position of Nmb Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caixabank and Nmb Financial.

Diversification Opportunities for Caixabank and Nmb Financial

-0.33

Correlation Coefficient

Caixabank  Nmb Financial

Very good diversification

The 3 months correlation between Caixabank and Nmb is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Caixabank SA ADR and Nmb Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nmb Financial Corp and Caixabank 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 Caixabank SA ADR are associated (or correlated) with Nmb Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nmb Financial Corp has no effect on the direction of Caixabank i.e., Caixabank and Nmb Financial go up and down completely randomly.

Pair Corralation between Caixabank and Nmb Financial

Assuming the 90 days horizon Caixabank SA ADR is expected to under-perform the Nmb Financial. In addition to that, Caixabank is 1.37 times more volatile than Nmb Financial Corp. It trades about -0.04 of its total potential returns per unit of risk. Nmb Financial Corp is currently generating about 0.33 per unit of volatility. If you would invest  1,026  in Nmb Financial Corp on September 5, 2024 and sell it today you would earn a total of  374.00  from holding Nmb Financial Corp or generate 36.45% return on investment over 90 days.

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

Caixabank SA ADR  vs.  Nmb Financial Corp

Caixabank SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caixabank SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Caixabank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nmb Financial Corp

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Nmb Financial Corp are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental drivers, Nmb Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caixabank and Nmb Financial

The main advantage of trading using opposite Caixabank and Nmb Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caixabank position performs unexpectedly, Nmb Financial 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 Nmb Financial will offset losses from the drop in Nmb Financial's long position.

The idea behind Caixabank SA ADR and Nmb Financial Corp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.