Correlation Between Merchant Bank and HATTON NATIONAL

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

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

Diversification Opportunities for Merchant Bank and HATTON NATIONAL

0.83

Correlation Coefficient

Merchant Bank  HATTON NATIONAL

Very poor diversification

The 3 months correlation between Merchant and HATTON is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Merchant Bank of and HATTON NATIONAL BANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HATTON NATIONAL BANK and Merchant 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 Merchant Bank of are associated (or correlated) with HATTON NATIONAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HATTON NATIONAL BANK has no effect on the direction of Merchant Bank i.e., Merchant Bank and HATTON NATIONAL go up and down completely randomly.

Pair Corralation between Merchant Bank and HATTON NATIONAL

Assuming the 90 days trading horizon Merchant Bank is expected to generate 2.91 times less return on investment than HATTON NATIONAL. In addition to that, Merchant Bank is 1.64 times more volatile than HATTON NATIONAL BANK. It trades about 0.07 of its total potential returns per unit of risk. HATTON NATIONAL BANK is currently generating about 0.32 per unit of volatility. If you would invest  13,300  in HATTON NATIONAL BANK on September 4, 2024 and sell it today you would earn a total of  5,450  from holding HATTON NATIONAL BANK or generate 40.98% return on investment over 90 days.

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

Merchant Bank of  vs.  HATTON NATIONAL BANK

Merchant Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Merchant Bank of are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Merchant Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

HATTON NATIONAL BANK

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HATTON NATIONAL BANK are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HATTON NATIONAL sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merchant Bank and HATTON NATIONAL

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

The idea behind Merchant Bank of and HATTON NATIONAL BANK 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.