Correlation Between BNK Financial and Dgb Financial

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

By analyzing existing cross correlation between BNK Financial Group and Dgb Financial, you can compare the effects of market volatilities on BNK Financial and Dgb Financial 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 BNK Financial with a short position of Dgb Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of BNK Financial and Dgb Financial.

Diversification Opportunities for BNK Financial and Dgb Financial

0.85

Correlation Coefficient

BNK Financial  Dgb Financial

Very poor diversification

The 3 months correlation between BNK and Dgb is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding BNK Financial Group and Dgb Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dgb Financial and BNK Financial 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 BNK Financial Group are associated (or correlated) with Dgb Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dgb Financial has no effect on the direction of BNK Financial i.e., BNK Financial and Dgb Financial go up and down completely randomly.

Pair Corralation between BNK Financial and Dgb Financial

Assuming the 90 days trading horizon BNK Financial Group is expected to generate 1.1 times more return on investment than Dgb Financial. However, BNK Financial is 1.1 times more volatile than Dgb Financial. It trades about 0.07 of its potential returns per unit of risk. Dgb Financial is currently generating about 0.02 per unit of risk. If you would invest  661,608  in BNK Financial Group on October 7, 2024 and sell it today you would earn a total of  384,392  from holding BNK Financial Group or generate 58.1% return on investment over 90 days.

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

BNK Financial Group  vs.  Dgb Financial

BNK Financial Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BNK Financial Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BNK Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Dgb Financial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dgb Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dgb Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BNK Financial and Dgb Financial

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

The idea behind BNK Financial Group and Dgb Financial 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.