Correlation Between Banco Products and Allied Blenders

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

By analyzing existing cross correlation between Banco Products Limited and Allied Blenders Distillers, you can compare the effects of market volatilities on Banco Products and Allied Blenders 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 Banco Products with a short position of Allied Blenders. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Products and Allied Blenders.

Diversification Opportunities for Banco Products and Allied Blenders

0.92

Correlation Coefficient

Banco Products  Allied Blenders

Almost no diversification

The 3 months correlation between Banco and Allied is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Banco Products Limited and Allied Blenders Distillers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Blenders Dist and Banco Products 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 Banco Products Limited are associated (or correlated) with Allied Blenders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Blenders Dist has no effect on the direction of Banco Products i.e., Banco Products and Allied Blenders go up and down completely randomly.

Pair Corralation between Banco Products and Allied Blenders

Assuming the 90 days trading horizon Banco Products Limited is expected to generate 1.67 times more return on investment than Allied Blenders. However, Banco Products is 1.67 times more volatile than Allied Blenders Distillers. It trades about -0.1 of its potential returns per unit of risk. Allied Blenders Distillers is currently generating about -0.17 per unit of risk. If you would invest  48,425  in Banco Products Limited on December 26, 2024 and sell it today you would lose (13,225) from holding Banco Products Limited or give up 27.31% of portfolio value over 90 days.

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

Banco Products Limited  vs.  Allied Blenders Distillers

Banco Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days Banco Products Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Allied Blenders Dist

Risk-Adjusted Performance

Very Weak

Over the last 90 days Allied Blenders Distillers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Banco Products and Allied Blenders

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

The idea behind Banco Products Limited and Allied Blenders Distillers 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.