Correlation Between Red Hill and Bank of Queensland Limite

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

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

Diversification Opportunities for Red Hill and Bank of Queensland Limite

-0.2

Correlation Coefficient

Red Hill  Bank of Queensland Limite

Good diversification

The 3 months correlation between Red and Bank is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Red Hill Iron and Bank of Queensland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Queensland Limite and Red Hill 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 Red Hill Iron are associated (or correlated) with Bank of Queensland Limite. 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 Limite has no effect on the direction of Red Hill i.e., Red Hill and Bank of Queensland Limite go up and down completely randomly.

Pair Corralation between Red Hill and Bank of Queensland Limite

Assuming the 90 days trading horizon Red Hill Iron is expected to under-perform the Bank of Queensland Limite. In addition to that, Red Hill is 5.15 times more volatile than Bank of Queensland. It trades about -0.26 of its total potential returns per unit of risk. Bank of Queensland is currently generating about 0.04 per unit of volatility. If you would invest  10,217  in Bank of Queensland on December 20, 2024 and sell it today you would earn a total of  80.00  from holding Bank of Queensland or generate 0.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Red Hill Iron  vs.  Bank of Queensland

Red Hill Iron

Risk-Adjusted Performance

Very Weak

Over the last 90 days Red Hill Iron has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Bank of Queensland Limite

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Queensland are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Bank of Queensland Limite is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Red Hill and Bank of Queensland Limite

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

The idea behind Red Hill Iron 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.