Correlation Between National Bank and Escorts Investment

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Can any of the company-specific risk be diversified away by investing in both National Bank and Escorts Investment 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 Escorts Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Bank and Escorts Investment Bank, you can compare the effects of market volatilities on National Bank and Escorts Investment 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 Escorts Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and Escorts Investment.

Diversification Opportunities for National Bank and Escorts Investment

-0.11
  Correlation Coefficient

Good diversification

The 3 months correlation between National and Escorts is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Of and Escorts Investment Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Escorts Investment Bank 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 are associated (or correlated) with Escorts Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Escorts Investment Bank has no effect on the direction of National Bank i.e., National Bank and Escorts Investment go up and down completely randomly.

Pair Corralation between National Bank and Escorts Investment

Assuming the 90 days trading horizon National Bank is expected to generate 0.43 times more return on investment than Escorts Investment. However, National Bank is 2.31 times less risky than Escorts Investment. It trades about 0.04 of its potential returns per unit of risk. Escorts Investment Bank is currently generating about -0.01 per unit of risk. If you would invest  2,913  in National Bank on December 29, 2023 and sell it today you would earn a total of  1,027  from holding National Bank or generate 35.26% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy93.54%
ValuesDaily Returns

National Bank Of  vs.  Escorts Investment Bank

 Performance 
       Timeline  
National Bank 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in National Bank are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting forward-looking signals, National Bank reported solid returns over the last few months and may actually be approaching a breakup point.
Escorts Investment Bank 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Escorts Investment Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

National Bank and Escorts Investment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with National Bank and Escorts Investment

The main advantage of trading using opposite National Bank and Escorts Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank position performs unexpectedly, Escorts Investment 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 Escorts Investment will offset losses from the drop in Escorts Investment's long position.
The idea behind National Bank and Escorts Investment 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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