Correlation Between National Bank and NGEx Minerals

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

Diversification Opportunities for National Bank and NGEx Minerals

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between National and NGEx is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and NGEx Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NGEx Minerals 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 NGEx Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NGEx Minerals has no effect on the direction of National Bank i.e., National Bank and NGEx Minerals go up and down completely randomly.

Pair Corralation between National Bank and NGEx Minerals

Assuming the 90 days trading horizon National Bank is expected to generate 4.26 times less return on investment than NGEx Minerals. But when comparing it to its historical volatility, National Bank of is 4.42 times less risky than NGEx Minerals. It trades about 0.2 of its potential returns per unit of risk. NGEx Minerals is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  985.00  in NGEx Minerals on September 5, 2024 and sell it today you would earn a total of  282.00  from holding NGEx Minerals or generate 28.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

National Bank of  vs.  NGEx Minerals

 Performance 
       Timeline  
National Bank 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in National Bank of are ranked lower than 15 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.
NGEx Minerals 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in NGEx Minerals are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, NGEx Minerals displayed solid returns over the last few months and may actually be approaching a breakup point.

National Bank and NGEx Minerals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with National Bank and NGEx Minerals

The main advantage of trading using opposite National Bank and NGEx Minerals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank position performs unexpectedly, NGEx Minerals 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 NGEx Minerals will offset losses from the drop in NGEx Minerals' long position.
The idea behind National Bank of and NGEx Minerals 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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