Correlation Between MT Bank and National Bank

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

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

Diversification Opportunities for MT Bank and National Bank

0.94

Correlation Coefficient

MT Bank  National Bank

Almost no diversification

The 3 months correlation between MTZ and National is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding MT Bank Corp and National Bank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank Holdings and MT 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 MT Bank Corp are associated (or correlated) with National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank Holdings has no effect on the direction of MT Bank i.e., MT Bank and National Bank go up and down completely randomly.

Pair Corralation between MT Bank and National Bank

Assuming the 90 days horizon MT Bank Corp is expected to generate 0.91 times more return on investment than National Bank. However, MT Bank Corp is 1.1 times less risky than National Bank. It trades about 0.23 of its potential returns per unit of risk. National Bank Holdings is currently generating about 0.14 per unit of risk. If you would invest  18,030  in MT Bank Corp on August 31, 2024 and sell it today you would earn a total of  2,820  from holding MT Bank Corp or generate 15.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.65%
Values	Daily Returns

MT Bank Corp  vs.  National Bank Holdings

MT Bank Corp

Risk-Adjusted Performance

17 of 100

Solid

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

National Bank Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, National Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MT Bank and National Bank

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

The idea behind MT Bank Corp and National Bank Holdings 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.