Correlation Between National Bank and Alumil Aluminium

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

By analyzing existing cross correlation between National Bank of and Alumil Aluminium Industry, you can compare the effects of market volatilities on National Bank and Alumil Aluminium 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 Alumil Aluminium. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and Alumil Aluminium.

Diversification Opportunities for National Bank and Alumil Aluminium

-0.21

Correlation Coefficient

National Bank  Alumil Aluminium

Very good diversification

The 3 months correlation between National and Alumil is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and Alumil Aluminium Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alumil Aluminium Industry 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 of are associated (or correlated) with Alumil Aluminium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alumil Aluminium Industry has no effect on the direction of National Bank i.e., National Bank and Alumil Aluminium go up and down completely randomly.

Pair Corralation between National Bank and Alumil Aluminium

Assuming the 90 days trading horizon National Bank of is expected to generate 0.82 times more return on investment than Alumil Aluminium. However, National Bank of is 1.23 times less risky than Alumil Aluminium. It trades about 0.09 of its potential returns per unit of risk. Alumil Aluminium Industry is currently generating about 0.04 per unit of risk. If you would invest  333.00  in National Bank of on January 31, 2024 and sell it today you would earn a total of  434.00  from holding National Bank of or generate 130.33% return on investment over 90 days.

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

National Bank of  vs.  Alumil Aluminium Industry

National Bank

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank of are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, National Bank may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Alumil Aluminium Industry

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with National Bank and Alumil Aluminium

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

The idea behind National Bank of and Alumil Aluminium Industry 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.