Correlation Between Bank Millennium and Noble Financials

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

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

Diversification Opportunities for Bank Millennium and Noble Financials

0.24

Correlation Coefficient

Bank Millennium  Noble Financials

Modest diversification

The 3 months correlation between Bank and Noble is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Bank Millennium SA and Noble Financials SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Noble Financials and Bank Millennium 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 Bank Millennium SA are associated (or correlated) with Noble Financials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Noble Financials has no effect on the direction of Bank Millennium i.e., Bank Millennium and Noble Financials go up and down completely randomly.

Pair Corralation between Bank Millennium and Noble Financials

Assuming the 90 days trading horizon Bank Millennium SA is expected to under-perform the Noble Financials. But the stock apears to be less risky and, when comparing its historical volatility, Bank Millennium SA is 1.83 times less risky than Noble Financials. The stock trades about -0.06 of its potential returns per unit of risk. The Noble Financials SA is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  9,520  in Noble Financials SA on September 4, 2024 and sell it today you would lose (1,020) from holding Noble Financials SA or give up 10.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Bank Millennium SA  vs.  Noble Financials SA

Bank Millennium SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Millennium SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Noble Financials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Noble Financials SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Bank Millennium and Noble Financials

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

The idea behind Bank Millennium SA and Noble Financials 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.