Correlation Between Commerzbank and National Capital

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

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

Diversification Opportunities for Commerzbank and National Capital

0.7

Correlation Coefficient

Commerzbank  National Capital

Poor diversification

The 3 months correlation between Commerzbank and National is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Commerzbank AG 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 Commerzbank 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 Commerzbank AG 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 Commerzbank i.e., Commerzbank and National Capital go up and down completely randomly.

Pair Corralation between Commerzbank and National Capital

Assuming the 90 days horizon Commerzbank AG PK is expected to generate 2.26 times more return on investment than National Capital. However, Commerzbank is 2.26 times more volatile than National Capital Bank. It trades about 0.2 of its potential returns per unit of risk. National Capital Bank is currently generating about 0.1 per unit of risk. If you would invest  1,893  in Commerzbank AG PK on February 1, 2025 and sell it today you would earn a total of  781.00  from holding Commerzbank AG PK or generate 41.26% return on investment over 90 days.

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

Commerzbank AG PK  vs.  National Capital Bank

Commerzbank AG PK

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Commerzbank AG PK are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Commerzbank showed solid returns over the last few months and may actually be approaching a breakup point.

National Capital Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Capital Bank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, National Capital may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Pair Trading with Commerzbank and National Capital

The main advantage of trading using opposite Commerzbank and National Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commerzbank 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 Commerzbank AG 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.