Correlation Between SCOR PK and National Capital

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

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

Diversification Opportunities for SCOR PK and National Capital

0.3

Correlation Coefficient

SCOR PK  National Capital

Weak diversification

The 3 months correlation between SCOR and National is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding SCOR PK and National Capital Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Capital Bank and SCOR PK 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 SCOR PK are associated (or correlated) with National Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Capital Bank has no effect on the direction of SCOR PK i.e., SCOR PK and National Capital go up and down completely randomly.

Pair Corralation between SCOR PK and National Capital

Assuming the 90 days horizon SCOR PK is expected to under-perform the National Capital. But the pink sheet apears to be less risky and, when comparing its historical volatility, SCOR PK is 1.72 times less risky than National Capital. The pink sheet trades about -0.13 of its potential returns per unit of risk. The National Capital Bank is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  18,525  in National Capital Bank on August 14, 2024 and sell it today you would earn a total of  3,475  from holding National Capital Bank or generate 18.76% return on investment over 90 days.

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

SCOR PK  vs.  National Capital Bank

SCOR PK

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SCOR PK are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SCOR PK showed solid returns over the last few months and may actually be approaching a breakup point.

National Capital Bank

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in National Capital Bank are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, National Capital sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SCOR PK and National Capital

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

The idea behind SCOR PK and National Capital Bank 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.