Correlation Between Bank of Queensland and MA Financial
Can any of the company-specific risk be diversified away by investing in both Bank of Queensland and MA Financial 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 Bank of Queensland and MA Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of Queensland and MA Financial Group, you can compare the effects of market volatilities on Bank of Queensland and MA Financial 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 Bank of Queensland with a short position of MA Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Queensland and MA Financial.
Diversification Opportunities for Bank of Queensland and MA Financial
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and MAF is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Queensland and MA Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MA Financial Group and Bank of Queensland 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 Bank of Queensland are associated (or correlated) with MA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MA Financial Group has no effect on the direction of Bank of Queensland i.e., Bank of Queensland and MA Financial go up and down completely randomly.
Pair Corralation between Bank of Queensland and MA Financial
Assuming the 90 days trading horizon Bank of Queensland is expected to generate 3.69 times less return on investment than MA Financial. But when comparing it to its historical volatility, Bank of Queensland is 6.62 times less risky than MA Financial. It trades about 0.08 of its potential returns per unit of risk. MA Financial Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 455.00 in MA Financial Group on August 26, 2024 and sell it today you would earn a total of 205.00 from holding MA Financial Group or generate 45.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Queensland vs. MA Financial Group
Performance |
| Timeline |
| Bank of Queensland |
| MA Financial Group |
Bank of Queensland and MA Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Queensland and MA Financial
The main advantage of trading using opposite Bank of Queensland and MA Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Queensland position performs unexpectedly, MA Financial 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 MA Financial will offset losses from the drop in MA Financial's long position.| Bank of Queensland vs. Mystate | Bank of Queensland vs. Insurance Australia Group | Bank of Queensland vs. Origin Energy | Bank of Queensland vs. Ecofibre |
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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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