Correlation Between Timbercreek Financial and National Bank

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

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

Diversification Opportunities for Timbercreek Financial and National Bank

-0.59

Correlation Coefficient

Timbercreek Financial  National Bank

Excellent diversification

The 3 months correlation between Timbercreek and National is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Timbercreek Financial Corp and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank and Timbercreek Financial 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 Timbercreek Financial Corp are associated (or correlated) with National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank has no effect on the direction of Timbercreek Financial i.e., Timbercreek Financial and National Bank go up and down completely randomly.

Pair Corralation between Timbercreek Financial and National Bank

Assuming the 90 days horizon Timbercreek Financial is expected to generate 14.43 times less return on investment than National Bank. In addition to that, Timbercreek Financial is 2.55 times more volatile than National Bank of. It trades about 0.0 of its total potential returns per unit of risk. National Bank of is currently generating about 0.17 per unit of volatility. If you would invest  2,281  in National Bank of on September 3, 2024 and sell it today you would earn a total of  128.00  from holding National Bank of or generate 5.61% return on investment over 90 days.

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

Timbercreek Financial Corp  vs.  National Bank of

Timbercreek Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timbercreek Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Timbercreek Financial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

National Bank

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank of are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, National Bank is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Timbercreek Financial and National Bank

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

The idea behind Timbercreek Financial Corp and National Bank of 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.