Correlation Between Bankers Investment and Porvair Plc

Can any of the company-specific risk be diversified away by investing in both Bankers Investment and Porvair Plc 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 Porvair Plc 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 Porvair plc, you can compare the effects of market volatilities on Bankers Investment and Porvair Plc 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 Porvair Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bankers Investment and Porvair Plc.

Diversification Opportunities for Bankers Investment and Porvair Plc

0.45

Correlation Coefficient

Bankers Investment  Porvair Plc

Very weak diversification

The 3 months correlation between Bankers and Porvair is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Bankers Investment Trust and Porvair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Porvair plc 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 Porvair Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Porvair plc has no effect on the direction of Bankers Investment i.e., Bankers Investment and Porvair Plc go up and down completely randomly.

Pair Corralation between Bankers Investment and Porvair Plc

Assuming the 90 days trading horizon Bankers Investment Trust is expected to generate 0.5 times more return on investment than Porvair Plc. However, Bankers Investment Trust is 1.99 times less risky than Porvair Plc. It trades about -0.01 of its potential returns per unit of risk. Porvair plc is currently generating about -0.02 per unit of risk. If you would invest  11,499  in Bankers Investment Trust on December 24, 2024 and sell it today you would lose (99.00) from holding Bankers Investment Trust or give up 0.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Bankers Investment Trust  vs.  Porvair plc

Bankers Investment Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bankers Investment Trust has generated negative risk-adjusted returns adding no value to fund investors. In spite of comparatively stable basic indicators, Bankers Investment is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Porvair plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Porvair plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Porvair Plc is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bankers Investment and Porvair Plc

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

The idea behind Bankers Investment Trust and Porvair plc 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.

Check out your portfolio center.

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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.