Correlation Between National Bank and Flour Mills

Can any of the company-specific risk be diversified away by investing in both National Bank and Flour Mills 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 Flour Mills 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 Flour Mills Kepenos, you can compare the effects of market volatilities on National Bank and Flour Mills 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 Flour Mills. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and Flour Mills.

Diversification Opportunities for National Bank and Flour Mills

-0.2

Correlation Coefficient

National Bank  Flour Mills

Good diversification

The 3 months correlation between National and Flour is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and Flour Mills Kepenos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flour Mills Kepenos 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 Flour Mills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flour Mills Kepenos has no effect on the direction of National Bank i.e., National Bank and Flour Mills go up and down completely randomly.

Pair Corralation between National Bank and Flour Mills

Assuming the 90 days trading horizon National Bank of is expected to generate 0.53 times more return on investment than Flour Mills. However, National Bank of is 1.9 times less risky than Flour Mills. It trades about 0.28 of its potential returns per unit of risk. Flour Mills Kepenos is currently generating about 0.06 per unit of risk. If you would invest  710.00  in National Bank of on February 5, 2024 and sell it today you would earn a total of  71.00  from holding National Bank of or generate 10.0% 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.  Flour Mills Kepenos

National Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank of are ranked lower than 7 (%) 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 June 2024.

Flour Mills Kepenos

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with National Bank and Flour Mills

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

The idea behind National Bank of and Flour Mills Kepenos 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.