Correlation Between National Bank and Athens General

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

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

Diversification Opportunities for National Bank and Athens General

0.77

Correlation Coefficient

National Bank  Athens General

Poor diversification

The 3 months correlation between National and Athens is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and Athens General Composite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Athens General Composite and National Bank 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 Bank of are associated (or correlated) with Athens General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Athens General Composite has no effect on the direction of National Bank i.e., National Bank and Athens General go up and down completely randomly.

Pair Corralation between National Bank and Athens General

Assuming the 90 days trading horizon National Bank of is expected to under-perform the Athens General. In addition to that, National Bank is 1.81 times more volatile than Athens General Composite. It trades about -0.06 of its total potential returns per unit of risk. Athens General Composite is currently generating about -0.03 per unit of volatility. If you would invest  144,741  in Athens General Composite on September 1, 2024 and sell it today you would lose (5,392) from holding Athens General Composite or give up 3.73% of portfolio value over 90 days.

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

National Bank of  vs.  Athens General Composite

Pair Trading with National Bank and Athens General

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

The idea behind National Bank of and Athens General Composite 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.