Correlation Between Bank of the and Bright Kindle

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

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

Diversification Opportunities for Bank of the and Bright Kindle

-0.24

Correlation Coefficient

Bank of the  Bright Kindle

Very good diversification

The 3 months correlation between Bank and Bright is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Bank of the and Bright Kindle Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Kindle Resources and Bank of the 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 Bank of the are associated (or correlated) with Bright Kindle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Kindle Resources has no effect on the direction of Bank of the i.e., Bank of the and Bright Kindle go up and down completely randomly.

Pair Corralation between Bank of the and Bright Kindle

Assuming the 90 days trading horizon Bank of the is expected to generate 0.42 times more return on investment than Bright Kindle. However, Bank of the is 2.39 times less risky than Bright Kindle. It trades about 0.09 of its potential returns per unit of risk. Bright Kindle Resources is currently generating about -0.03 per unit of risk. If you would invest  12,150  in Bank of the on September 13, 2024 and sell it today you would earn a total of  1,310  from holding Bank of the or generate 10.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.63%
Values	Daily Returns

Bank of the  vs.  Bright Kindle Resources

Bank of the

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of the are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Bank of the may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bright Kindle Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bright Kindle Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Bank of the and Bright Kindle

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

The idea behind Bank of the and Bright Kindle Resources 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.