Correlation Between Bio Path and National Bank
Can any of the company-specific risk be diversified away by investing in both Bio Path 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 Bio Path and National Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bio Path Holdings and National Bank Holdings, you can compare the effects of market volatilities on Bio Path 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 Bio Path with a short position of National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bio Path and National Bank.
Diversification Opportunities for Bio Path and National Bank
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bio and National is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Bio Path Holdings and National Bank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank Holdings and Bio Path 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 Bio Path Holdings 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 Holdings has no effect on the direction of Bio Path i.e., Bio Path and National Bank go up and down completely randomly.
Pair Corralation between Bio Path and National Bank
Given the investment horizon of 90 days Bio Path Holdings is expected to under-perform the National Bank. In addition to that, Bio Path is 3.34 times more volatile than National Bank Holdings. It trades about -0.04 of its total potential returns per unit of risk. National Bank Holdings is currently generating about 0.01 per unit of volatility. If you would invest 3,278 in National Bank Holdings on December 30, 2023 and sell it today you would lose (98.00) from holding National Bank Holdings or give up 2.99% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 97.82% |
Values | Daily Returns |
Bio Path Holdings vs. National Bank Holdings
Performance |
Timeline |
Bio Path Holdings |
National Bank Holdings |
Bio Path and National Bank Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bio Path and National Bank
The main advantage of trading using opposite Bio Path and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bio Path 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 Bio Path Holdings and National Bank Holdings 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.National Bank vs. CosmoSteel Holdings Limited | National Bank vs. Verizon Communications | National Bank vs. BlueScope Steel Limited | National Bank vs. INTERSHOP Communications Aktiengesellschaft |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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