Correlation Between National Bank and Liberty Defense
Can any of the company-specific risk be diversified away by investing in both National Bank and Liberty Defense 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 Liberty Defense 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 Liberty Defense Holdings, you can compare the effects of market volatilities on National Bank and Liberty Defense 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 Liberty Defense. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and Liberty Defense.
Diversification Opportunities for National Bank and Liberty Defense
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between National and Liberty is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and Liberty Defense Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Defense Holdings 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 Liberty Defense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Defense Holdings has no effect on the direction of National Bank i.e., National Bank and Liberty Defense go up and down completely randomly.
Pair Corralation between National Bank and Liberty Defense
Assuming the 90 days horizon National Bank is expected to generate 2.73 times less return on investment than Liberty Defense. But when comparing it to its historical volatility, National Bank of is 11.66 times less risky than Liberty Defense. It trades about 0.11 of its potential returns per unit of risk. Liberty Defense Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 93.00 in Liberty Defense Holdings on September 18, 2024 and sell it today you would lose (9.00) from holding Liberty Defense Holdings or give up 9.68% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
National Bank of vs. Liberty Defense Holdings
Performance |
Timeline |
National Bank |
Liberty Defense Holdings |
National Bank and Liberty Defense Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with National Bank and Liberty Defense
The main advantage of trading using opposite National Bank and Liberty Defense positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank position performs unexpectedly, Liberty Defense 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 Liberty Defense will offset losses from the drop in Liberty Defense's long position.National Bank vs. Canadian Imperial Bank | National Bank vs. Bank of Montreal | National Bank vs. Royal Bank of | National Bank vs. Bank of Nova |
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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