Correlation Between NBS BANK and FDH BANK

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

By analyzing existing cross correlation between NBS BANK LIMITED and FDH BANK PLC, you can compare the effects of market volatilities on NBS BANK and FDH BANK 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 NBS BANK with a short position of FDH BANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of NBS BANK and FDH BANK.

Diversification Opportunities for NBS BANK and FDH BANK

-0.83

Correlation Coefficient

NBS BANK  FDH BANK

Pay attention - limited upside

The 3 months correlation between NBS and FDH is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding NBS BANK LIMITED and FDH BANK PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FDH BANK PLC and NBS 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 NBS BANK LIMITED are associated (or correlated) with FDH BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FDH BANK PLC has no effect on the direction of NBS BANK i.e., NBS BANK and FDH BANK go up and down completely randomly.

Pair Corralation between NBS BANK and FDH BANK

Assuming the 90 days trading horizon NBS BANK LIMITED is expected to generate 16.43 times more return on investment than FDH BANK. However, NBS BANK is 16.43 times more volatile than FDH BANK PLC. It trades about 0.29 of its potential returns per unit of risk. FDH BANK PLC is currently generating about -0.94 per unit of risk. If you would invest  14,963  in NBS BANK LIMITED on September 15, 2024 and sell it today you would earn a total of  237.00  from holding NBS BANK LIMITED or generate 1.58% return on investment over 90 days.

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

NBS BANK LIMITED  vs.  FDH BANK PLC

NBS BANK LIMITED

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NBS BANK LIMITED are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, NBS BANK is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

FDH BANK PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FDH BANK PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, FDH BANK is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NBS BANK and FDH BANK

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

The idea behind NBS BANK LIMITED and FDH BANK PLC 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.