Correlation Between BNK Financial and Industrial Bank
Can any of the company-specific risk be diversified away by investing in both BNK Financial and Industrial Bank 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 BNK Financial and Industrial Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BNK Financial Group and Industrial Bank, you can compare the effects of market volatilities on BNK Financial and Industrial Bank 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 BNK Financial with a short position of Industrial Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of BNK Financial and Industrial Bank.
Diversification Opportunities for BNK Financial and Industrial Bank
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between BNK and Industrial is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding BNK Financial Group and Industrial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Bank and BNK Financial 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 BNK Financial Group are associated (or correlated) with Industrial Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Bank has no effect on the direction of BNK Financial i.e., BNK Financial and Industrial Bank go up and down completely randomly.
Pair Corralation between BNK Financial and Industrial Bank
Assuming the 90 days trading horizon BNK Financial Group is expected to generate 1.81 times more return on investment than Industrial Bank. However, BNK Financial is 1.81 times more volatile than Industrial Bank. It trades about 0.31 of its potential returns per unit of risk. Industrial Bank is currently generating about 0.26 per unit of risk. If you would invest 944,000 in BNK Financial Group on September 1, 2024 and sell it today you would earn a total of 112,000 from holding BNK Financial Group or generate 11.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BNK Financial Group vs. Industrial Bank
Performance |
| Timeline |
| BNK Financial Group |
| Industrial Bank |
BNK Financial and Industrial Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BNK Financial and Industrial Bank
The main advantage of trading using opposite BNK Financial and Industrial Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BNK Financial position performs unexpectedly, Industrial Bank 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 Industrial Bank will offset losses from the drop in Industrial Bank's long position.| BNK Financial vs. Samsung Electronics Co | BNK Financial vs. Samsung Electronics Co | BNK Financial vs. KB Financial Group | BNK Financial vs. Shinhan Financial Group |
| Industrial Bank vs. Samsung Electronics Co | Industrial Bank vs. Samsung Electronics Co | Industrial Bank vs. KB Financial Group | Industrial Bank vs. Shinhan Financial Group |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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