Correlation Between National Retail and BBVA Banco

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

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

Diversification Opportunities for National Retail and BBVA Banco

-0.6

Correlation Coefficient

National Retail  BBVA Banco

Excellent diversification

The 3 months correlation between National and BBVA is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding National Retail Properties and BBVA Banco Frances in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBVA Banco Frances and National Retail 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 National Retail Properties are associated (or correlated) with BBVA Banco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBVA Banco Frances has no effect on the direction of National Retail i.e., National Retail and BBVA Banco go up and down completely randomly.

Pair Corralation between National Retail and BBVA Banco

Assuming the 90 days trading horizon National Retail is expected to generate 168.78 times less return on investment than BBVA Banco. But when comparing it to its historical volatility, National Retail Properties is 2.9 times less risky than BBVA Banco. It trades about 0.0 of its potential returns per unit of risk. BBVA Banco Frances is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  875.00  in BBVA Banco Frances on September 3, 2024 and sell it today you would earn a total of  675.00  from holding BBVA Banco Frances or generate 77.14% return on investment over 90 days.

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

National Retail Properties  vs.  BBVA Banco Frances

National Retail Prop

Risk-Adjusted Performance

0 of 100

Very Weak

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

BBVA Banco Frances

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BBVA Banco Frances are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, BBVA Banco reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Retail and BBVA Banco

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

The idea behind National Retail Properties and BBVA Banco Frances 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.