Correlation Between Preferred Bank and POSBO UNSPADRS/20YC1

Can any of the company-specific risk be diversified away by investing in both Preferred Bank and POSBO UNSPADRS/20YC1 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 Preferred Bank and POSBO UNSPADRS/20YC1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Preferred Bank and POSBO UNSPADRS20YC1, you can compare the effects of market volatilities on Preferred Bank and POSBO UNSPADRS/20YC1 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 Preferred Bank with a short position of POSBO UNSPADRS/20YC1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Preferred Bank and POSBO UNSPADRS/20YC1.

Diversification Opportunities for Preferred Bank and POSBO UNSPADRS/20YC1

-0.42

Correlation Coefficient

Preferred Bank  POSBO UNSPADRS/20YC1

Very good diversification

The 3 months correlation between Preferred and POSBO is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Preferred Bank and POSBO UNSPADRS20YC1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSBO UNSPADRS/20YC1 and Preferred 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 Preferred Bank are associated (or correlated) with POSBO UNSPADRS/20YC1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSBO UNSPADRS/20YC1 has no effect on the direction of Preferred Bank i.e., Preferred Bank and POSBO UNSPADRS/20YC1 go up and down completely randomly.

Pair Corralation between Preferred Bank and POSBO UNSPADRS/20YC1

Assuming the 90 days horizon Preferred Bank is expected to under-perform the POSBO UNSPADRS/20YC1. But the stock apears to be less risky and, when comparing its historical volatility, Preferred Bank is 1.47 times less risky than POSBO UNSPADRS/20YC1. The stock trades about -0.21 of its potential returns per unit of risk. The POSBO UNSPADRS20YC1 is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  999.00  in POSBO UNSPADRS20YC1 on October 9, 2024 and sell it today you would earn a total of  71.00  from holding POSBO UNSPADRS20YC1 or generate 7.11% return on investment over 90 days.

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

Preferred Bank  vs.  POSBO UNSPADRS20YC1

Preferred Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Preferred Bank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Preferred Bank reported solid returns over the last few months and may actually be approaching a breakup point.

POSBO UNSPADRS/20YC1

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in POSBO UNSPADRS20YC1 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental drivers, POSBO UNSPADRS/20YC1 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Preferred Bank and POSBO UNSPADRS/20YC1

The main advantage of trading using opposite Preferred Bank and POSBO UNSPADRS/20YC1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Preferred Bank position performs unexpectedly, POSBO UNSPADRS/20YC1 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 POSBO UNSPADRS/20YC1 will offset losses from the drop in POSBO UNSPADRS/20YC1's long position.

The idea behind Preferred Bank and POSBO UNSPADRS20YC1 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.