Correlation Between Bank of Queensland and MotorCycle Holdings
Can any of the company-specific risk be diversified away by investing in both Bank of Queensland and MotorCycle Holdings 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 MotorCycle Holdings 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 MotorCycle Holdings, you can compare the effects of market volatilities on Bank of Queensland and MotorCycle Holdings 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 MotorCycle Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Queensland and MotorCycle Holdings.
Diversification Opportunities for Bank of Queensland and MotorCycle Holdings
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and MotorCycle is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Queensland and MotorCycle Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MotorCycle Holdings 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 MotorCycle Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MotorCycle Holdings has no effect on the direction of Bank of Queensland i.e., Bank of Queensland and MotorCycle Holdings go up and down completely randomly.
Pair Corralation between Bank of Queensland and MotorCycle Holdings
Assuming the 90 days trading horizon Bank of Queensland is expected to generate 0.16 times more return on investment than MotorCycle Holdings. However, Bank of Queensland is 6.2 times less risky than MotorCycle Holdings. It trades about 0.08 of its potential returns per unit of risk. MotorCycle Holdings is currently generating about 0.0 per unit of risk. If you would invest 9,851 in Bank of Queensland on August 25, 2024 and sell it today you would earn a total of 669.00 from holding Bank of Queensland or generate 6.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Queensland vs. MotorCycle Holdings
Performance |
| Timeline |
| Bank of Queensland |
| MotorCycle Holdings |
Bank of Queensland and MotorCycle Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Queensland and MotorCycle Holdings
The main advantage of trading using opposite Bank of Queensland and MotorCycle Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Queensland position performs unexpectedly, MotorCycle Holdings 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 MotorCycle Holdings will offset losses from the drop in MotorCycle Holdings' 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 |
| MotorCycle Holdings vs. Cleanaway Waste Management | MotorCycle Holdings vs. WiseTech Global Limited | MotorCycle Holdings vs. Hawsons Iron | MotorCycle Holdings vs. Janison Education 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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