Correlation Between National Bank and INFORMATION SVC

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

By analyzing existing cross correlation between National Bank Holdings and INFORMATION SVC GRP, you can compare the effects of market volatilities on National Bank and INFORMATION SVC 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 INFORMATION SVC. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and INFORMATION SVC.

Diversification Opportunities for National Bank and INFORMATION SVC

0.74

Correlation Coefficient

National Bank  INFORMATION SVC

Poor diversification

The 3 months correlation between National and INFORMATION is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and INFORMATION SVC GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INFORMATION SVC GRP 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 Holdings are associated (or correlated) with INFORMATION SVC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INFORMATION SVC GRP has no effect on the direction of National Bank i.e., National Bank and INFORMATION SVC go up and down completely randomly.

Pair Corralation between National Bank and INFORMATION SVC

Assuming the 90 days horizon National Bank is expected to generate 1.17 times less return on investment than INFORMATION SVC. In addition to that, National Bank is 1.25 times more volatile than INFORMATION SVC GRP. It trades about 0.1 of its total potential returns per unit of risk. INFORMATION SVC GRP is currently generating about 0.14 per unit of volatility. If you would invest  278.00  in INFORMATION SVC GRP on September 21, 2024 and sell it today you would earn a total of  54.00  from holding INFORMATION SVC GRP or generate 19.42% return on investment over 90 days.

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

National Bank Holdings  vs.  INFORMATION SVC GRP

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.

INFORMATION SVC GRP

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in INFORMATION SVC GRP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, INFORMATION SVC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Bank and INFORMATION SVC

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

The idea behind National Bank Holdings and INFORMATION SVC GRP 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.