Correlation Between BNK Financial and LAKE MATERIALS

Can any of the company-specific risk be diversified away by investing in both BNK Financial and LAKE MATERIALS 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 LAKE MATERIALS 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 LAKE MATERIALS LTD, you can compare the effects of market volatilities on BNK Financial and LAKE MATERIALS 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 LAKE MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of BNK Financial and LAKE MATERIALS.

Diversification Opportunities for BNK Financial and LAKE MATERIALS

-0.75

Correlation Coefficient

BNK Financial  LAKE MATERIALS

Pay attention - limited upside

The 3 months correlation between BNK and LAKE is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding BNK Financial Group and LAKE MATERIALS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LAKE MATERIALS LTD 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 LAKE MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LAKE MATERIALS LTD has no effect on the direction of BNK Financial i.e., BNK Financial and LAKE MATERIALS go up and down completely randomly.

Pair Corralation between BNK Financial and LAKE MATERIALS

Assuming the 90 days trading horizon BNK Financial Group is expected to under-perform the LAKE MATERIALS. But the stock apears to be less risky and, when comparing its historical volatility, BNK Financial Group is 2.48 times less risky than LAKE MATERIALS. The stock trades about -0.08 of its potential returns per unit of risk. The LAKE MATERIALS LTD is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  979,000  in LAKE MATERIALS LTD on October 9, 2024 and sell it today you would earn a total of  211,000  from holding LAKE MATERIALS LTD or generate 21.55% return on investment over 90 days.

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

BNK Financial Group  vs.  LAKE MATERIALS LTD

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.

LAKE MATERIALS LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LAKE MATERIALS LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with BNK Financial and LAKE MATERIALS

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

The idea behind BNK Financial Group and LAKE MATERIALS LTD 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.