Correlation Between National Bank and German American

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

Diversification Opportunities for National Bank and German American

0.95

Correlation Coefficient

National Bank  German American

Almost no diversification

The 3 months correlation between National and German is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and German American Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on German American Bancorp 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 German American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of German American Bancorp has no effect on the direction of National Bank i.e., National Bank and German American go up and down completely randomly.

Pair Corralation between National Bank and German American

Given the investment horizon of 90 days National Bank is expected to generate 1.29 times less return on investment than German American. In addition to that, National Bank is 1.17 times more volatile than German American Bancorp. It trades about 0.07 of its total potential returns per unit of risk. German American Bancorp is currently generating about 0.11 per unit of volatility. If you would invest  3,927  in German American Bancorp on September 2, 2024 and sell it today you would earn a total of  571.00  from holding German American Bancorp or generate 14.54% return on investment over 90 days.

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

National Bank Holdings  vs.  German American Bancorp

National Bank Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical indicators, National Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

German American Bancorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in German American Bancorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental drivers, German American exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Bank and German American

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

The idea behind National Bank Holdings and German American Bancorp 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.