Correlation Between National Bank and Lavipharm

Can any of the company-specific risk be diversified away by investing in both National Bank and Lavipharm 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 Lavipharm 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 Lavipharm SA, you can compare the effects of market volatilities on National Bank and Lavipharm 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 Lavipharm. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and Lavipharm.

Diversification Opportunities for National Bank and Lavipharm

0.72

Correlation Coefficient

National Bank  Lavipharm

Poor diversification

The 3 months correlation between National and Lavipharm is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and Lavipharm SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lavipharm SA 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 Lavipharm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lavipharm SA has no effect on the direction of National Bank i.e., National Bank and Lavipharm go up and down completely randomly.

Pair Corralation between National Bank and Lavipharm

Assuming the 90 days trading horizon National Bank of is expected to generate 0.98 times more return on investment than Lavipharm. However, National Bank of is 1.02 times less risky than Lavipharm. It trades about -0.05 of its potential returns per unit of risk. Lavipharm SA is currently generating about -0.11 per unit of risk. If you would invest  769.00  in National Bank of on September 5, 2024 and sell it today you would lose (49.00) from holding National Bank of or give up 6.37% 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.  Lavipharm SA

National Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lavipharm SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lavipharm SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with National Bank and Lavipharm

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

The idea behind National Bank of and Lavipharm SA 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.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.