Correlation Between Berner Kantonalbank and Caledonia Investments
Can any of the company-specific risk be diversified away by investing in both Berner Kantonalbank and Caledonia Investments 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 Berner Kantonalbank and Caledonia Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Berner Kantonalbank AG and Caledonia Investments, you can compare the effects of market volatilities on Berner Kantonalbank and Caledonia Investments 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 Berner Kantonalbank with a short position of Caledonia Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berner Kantonalbank and Caledonia Investments.
Diversification Opportunities for Berner Kantonalbank and Caledonia Investments
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Berner and Caledonia is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Berner Kantonalbank AG and Caledonia Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caledonia Investments and Berner Kantonalbank 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 Berner Kantonalbank AG are associated (or correlated) with Caledonia Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caledonia Investments has no effect on the direction of Berner Kantonalbank i.e., Berner Kantonalbank and Caledonia Investments go up and down completely randomly.
Pair Corralation between Berner Kantonalbank and Caledonia Investments
Assuming the 90 days trading horizon Berner Kantonalbank is expected to generate 1.86 times less return on investment than Caledonia Investments. But when comparing it to its historical volatility, Berner Kantonalbank AG is 1.33 times less risky than Caledonia Investments. It trades about 0.28 of its potential returns per unit of risk. Caledonia Investments is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest 355,500 in Caledonia Investments on November 5, 2024 and sell it today you would earn a total of 24,000 from holding Caledonia Investments or generate 6.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
Berner Kantonalbank AG vs. Caledonia Investments
Performance |
| Timeline |
| Berner Kantonalbank |
| Caledonia Investments |
Berner Kantonalbank and Caledonia Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Berner Kantonalbank and Caledonia Investments
The main advantage of trading using opposite Berner Kantonalbank and Caledonia Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berner Kantonalbank position performs unexpectedly, Caledonia Investments 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 Caledonia Investments will offset losses from the drop in Caledonia Investments' long position.| Berner Kantonalbank vs. Fulcrum Metals PLC | Berner Kantonalbank vs. First Class Metals | Berner Kantonalbank vs. Charter Communications Cl | Berner Kantonalbank vs. Cairo Communication SpA |
| Caledonia Investments vs. Ion Beam Applications | Caledonia Investments vs. PPHE Hotel Group | Caledonia Investments vs. Automatic Data Processing | Caledonia Investments vs. Fidelity National Information |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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