Correlation Between National Bank and Eros Resources

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

Diversification Opportunities for National Bank and Eros Resources

0.24

Correlation Coefficient

National Bank  Eros Resources

Modest diversification

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

Pair Corralation between National Bank and Eros Resources

Assuming the 90 days trading horizon National Bank is expected to generate 7.86 times less return on investment than Eros Resources. But when comparing it to its historical volatility, National Bank of is 14.55 times less risky than Eros Resources. It trades about 0.17 of its potential returns per unit of risk. Eros Resources Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3.50  in Eros Resources Corp on September 14, 2024 and sell it today you would earn a total of  1.00  from holding Eros Resources Corp or generate 28.57% return on investment over 90 days.

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

National Bank of  vs.  Eros Resources Corp

National Bank

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank of are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic 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.

Eros Resources Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eros Resources Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Eros Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Bank and Eros Resources

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

The idea behind National Bank of and Eros Resources Corp 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.