Correlation Between Bank of NT and Winmark

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

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

Diversification Opportunities for Bank of NT and Winmark

0.62

Correlation Coefficient

Bank of NT  Winmark

Poor diversification

The 3 months correlation between Bank and Winmark is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Bank of NT and Winmark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Winmark and Bank of NT 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 Bank of NT are associated (or correlated) with Winmark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Winmark has no effect on the direction of Bank of NT i.e., Bank of NT and Winmark go up and down completely randomly.

Pair Corralation between Bank of NT and Winmark

Considering the 90-day investment horizon Bank of NT is expected to under-perform the Winmark. But the stock apears to be less risky and, when comparing its historical volatility, Bank of NT is 1.15 times less risky than Winmark. The stock trades about -0.05 of its potential returns per unit of risk. The Winmark is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  37,656  in Winmark on September 19, 2024 and sell it today you would earn a total of  3,162  from holding Winmark or generate 8.4% return on investment over 90 days.

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

Bank of NT  vs.  Winmark

Bank of NT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank of NT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Bank of NT is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Winmark

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Winmark are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Winmark may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bank of NT and Winmark

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

The idea behind Bank of NT and Winmark 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.