Correlation Between Bank Of and Habitat Ii

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

By analyzing existing cross correlation between The Bank of and Habitat Ii , you can compare the effects of market volatilities on Bank Of and Habitat Ii 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 Bank Of with a short position of Habitat Ii. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Of and Habitat Ii.

Diversification Opportunities for Bank Of and Habitat Ii

0.03

Correlation Coefficient

Bank Of  Habitat Ii

Significant diversification

The 3 months correlation between Bank and Habitat is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding The Bank of and Habitat Ii in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habitat Ii and Bank Of 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 The Bank of are associated (or correlated) with Habitat Ii. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Habitat Ii has no effect on the direction of Bank Of i.e., Bank Of and Habitat Ii go up and down completely randomly.

Pair Corralation between Bank Of and Habitat Ii

Assuming the 90 days trading horizon The Bank of is expected to generate 1.1 times more return on investment than Habitat Ii. However, Bank Of is 1.1 times more volatile than Habitat Ii . It trades about 0.1 of its potential returns per unit of risk. Habitat Ii is currently generating about 0.02 per unit of risk. If you would invest  45,683  in The Bank of on November 20, 2024 and sell it today you would earn a total of  4,030  from holding The Bank of or generate 8.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	81.36%
Values	Daily Returns

The Bank of  vs.  Habitat Ii

The Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Bank of are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bank Of may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Habitat Ii

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Habitat Ii are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong fundamental drivers, Habitat Ii is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bank Of and Habitat Ii

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

The idea behind The Bank of and Habitat Ii 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 Transaction History module to view history of all your transactions and understand their impact on performance.