Correlation Between Carawine Resources and Bank of Queensland

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

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

Diversification Opportunities for Carawine Resources and Bank of Queensland

0.14

Correlation Coefficient

Carawine Resources  Bank of Queensland

Average diversification

The 3 months correlation between Carawine and Bank is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Carawine Resources Limited and Bank of Queensland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Queensland and Carawine Resources 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 Carawine Resources Limited are associated (or correlated) with Bank of Queensland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Queensland has no effect on the direction of Carawine Resources i.e., Carawine Resources and Bank of Queensland go up and down completely randomly.

Pair Corralation between Carawine Resources and Bank of Queensland

Assuming the 90 days trading horizon Carawine Resources Limited is expected to generate 10.37 times more return on investment than Bank of Queensland. However, Carawine Resources is 10.37 times more volatile than Bank of Queensland. It trades about 0.01 of its potential returns per unit of risk. Bank of Queensland is currently generating about 0.06 per unit of risk. If you would invest  12.00  in Carawine Resources Limited on October 26, 2024 and sell it today you would lose (1.00) from holding Carawine Resources Limited or give up 8.33% of portfolio value over 90 days.

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

Carawine Resources Limited  vs.  Bank of Queensland

Carawine Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Carawine Resources Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Carawine Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.

Bank of Queensland

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank of Queensland has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Bank of Queensland is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Carawine Resources and Bank of Queensland

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

The idea behind Carawine Resources Limited and Bank of Queensland 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.