Correlation Between Binance Coin and Preferred Bank
Can any of the company-specific risk be diversified away by investing in both Binance Coin and Preferred 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 Binance Coin and Preferred Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Binance Coin and Preferred Bank, you can compare the effects of market volatilities on Binance Coin and Preferred 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 Binance Coin with a short position of Preferred Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Binance Coin and Preferred Bank.
Diversification Opportunities for Binance Coin and Preferred Bank
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Binance and Preferred is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Binance Coin and Preferred Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Preferred Bank and Binance Coin 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 Binance Coin are associated (or correlated) with Preferred Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Preferred Bank has no effect on the direction of Binance Coin i.e., Binance Coin and Preferred Bank go up and down completely randomly.
Pair Corralation between Binance Coin and Preferred Bank
Assuming the 90 days trading horizon Binance Coin is expected to generate 1.9 times more return on investment than Preferred Bank. However, Binance Coin is 1.9 times more volatile than Preferred Bank. It trades about -0.04 of its potential returns per unit of risk. Preferred Bank is currently generating about -0.38 per unit of risk. If you would invest 70,610 in Binance Coin on October 12, 2024 and sell it today you would lose (1,840) from holding Binance Coin or give up 2.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 80.95% |
| Values | Daily Returns |
Binance Coin vs. Preferred Bank
Performance |
| Timeline |
| Binance Coin |
| Preferred Bank |
Binance Coin and Preferred Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Binance Coin and Preferred Bank
The main advantage of trading using opposite Binance Coin and Preferred Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Binance Coin position performs unexpectedly, Preferred 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 Preferred Bank will offset losses from the drop in Preferred Bank's long position.| Binance Coin vs. Staked Ether | Binance Coin vs. Cronos | Binance Coin vs. Wrapped Bitcoin | Binance Coin vs. Monero |
| Preferred Bank vs. Keck Seng Investments | Preferred Bank vs. PennyMac Mortgage Investment | Preferred Bank vs. PennantPark Investment | Preferred Bank vs. GBS Software AG |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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