Correlation Between EP Financial and BSP Financial
Can any of the company-specific risk be diversified away by investing in both EP Financial and BSP 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 EP Financial and BSP Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EP Financial Group and BSP Financial Group, you can compare the effects of market volatilities on EP Financial and BSP 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 EP Financial with a short position of BSP Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of EP Financial and BSP Financial.
Diversification Opportunities for EP Financial and BSP Financial
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between EP1 and BSP is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding EP Financial Group and BSP Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BSP Financial Group and EP 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 EP Financial Group are associated (or correlated) with BSP Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BSP Financial Group has no effect on the direction of EP Financial i.e., EP Financial and BSP Financial go up and down completely randomly.
Pair Corralation between EP Financial and BSP Financial
Assuming the 90 days trading horizon EP Financial is expected to generate 2.68 times less return on investment than BSP Financial. In addition to that, EP Financial is 1.8 times more volatile than BSP Financial Group. It trades about 0.01 of its total potential returns per unit of risk. BSP Financial Group is currently generating about 0.06 per unit of volatility. If you would invest 397.00 in BSP Financial Group on August 29, 2024 and sell it today you would earn a total of 253.00 from holding BSP Financial Group or generate 63.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
EP Financial Group vs. BSP Financial Group
Performance |
| Timeline |
| EP Financial Group |
| BSP Financial Group |
EP Financial and BSP Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EP Financial and BSP Financial
The main advantage of trading using opposite EP Financial and BSP Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EP Financial position performs unexpectedly, BSP 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 BSP Financial will offset losses from the drop in BSP Financial's long position.| EP Financial vs. National Australia Bank | EP Financial vs. BSP Financial Group | EP Financial vs. Macquarie Bank Limited | EP Financial vs. Westpac Banking |
| BSP Financial vs. Energy Resources | BSP Financial vs. 88 Energy | BSP Financial vs. Amani Gold | BSP Financial vs. A1 Investments Resources |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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