Correlation Between NATIONAL INVESTMENT and NBS BANK

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

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

Diversification Opportunities for NATIONAL INVESTMENT and NBS BANK

0.64

Correlation Coefficient

NATIONAL INVESTMENT  NBS BANK

Poor diversification

The 3 months correlation between NATIONAL and NBS is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding NATIONAL INVESTMENT TRUST and NBS BANK LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NBS BANK LIMITED and NATIONAL INVESTMENT 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 INVESTMENT TRUST are associated (or correlated) with NBS BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NBS BANK LIMITED has no effect on the direction of NATIONAL INVESTMENT i.e., NATIONAL INVESTMENT and NBS BANK go up and down completely randomly.

Pair Corralation between NATIONAL INVESTMENT and NBS BANK

Assuming the 90 days trading horizon NATIONAL INVESTMENT TRUST is expected to generate 6.27 times more return on investment than NBS BANK. However, NATIONAL INVESTMENT is 6.27 times more volatile than NBS BANK LIMITED. It trades about 0.12 of its potential returns per unit of risk. NBS BANK LIMITED is currently generating about 0.17 per unit of risk. If you would invest  41,116  in NATIONAL INVESTMENT TRUST on September 15, 2024 and sell it today you would earn a total of  2,884  from holding NATIONAL INVESTMENT TRUST or generate 7.01% return on investment over 90 days.

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

NATIONAL INVESTMENT TRUST  vs.  NBS BANK LIMITED

NATIONAL INVESTMENT TRUST

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NATIONAL INVESTMENT TRUST are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, NATIONAL INVESTMENT may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with NATIONAL INVESTMENT and NBS BANK

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

The idea behind NATIONAL INVESTMENT TRUST and NBS BANK LIMITED 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.