Correlation Between Bankers Investment and Edinburgh Investment

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

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

Diversification Opportunities for Bankers Investment and Edinburgh Investment

0.7

Correlation Coefficient

Bankers Investment  Edinburgh Investment

Poor diversification

The 3 months correlation between Bankers and Edinburgh is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Bankers Investment Trust and Edinburgh Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edinburgh Investment and Bankers Investment 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 Bankers Investment Trust are associated (or correlated) with Edinburgh Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edinburgh Investment has no effect on the direction of Bankers Investment i.e., Bankers Investment and Edinburgh Investment go up and down completely randomly.

Pair Corralation between Bankers Investment and Edinburgh Investment

Assuming the 90 days trading horizon Bankers Investment Trust is expected to generate 1.04 times more return on investment than Edinburgh Investment. However, Bankers Investment is 1.04 times more volatile than Edinburgh Investment Trust. It trades about 0.21 of its potential returns per unit of risk. Edinburgh Investment Trust is currently generating about 0.09 per unit of risk. If you would invest  11,280  in Bankers Investment Trust on October 25, 2024 and sell it today you would earn a total of  1,080  from holding Bankers Investment Trust or generate 9.57% return on investment over 90 days.

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

Bankers Investment Trust  vs.  Edinburgh Investment Trust

Bankers Investment Trust

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bankers Investment Trust are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Bankers Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Edinburgh Investment

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Edinburgh Investment Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Edinburgh Investment is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bankers Investment and Edinburgh Investment

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

The idea behind Bankers Investment Trust and Edinburgh Investment Trust 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.