Correlation Between Fras Le and Bank Of
Can any of the company-specific risk be diversified away by investing in both Fras Le and Bank Of 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 Fras Le and Bank Of into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fras le SA and The Bank of, you can compare the effects of market volatilities on Fras Le and Bank Of 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 Fras Le with a short position of Bank Of. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fras Le and Bank Of.
Diversification Opportunities for Fras Le and Bank Of
Poor diversification
The 3 months correlation between Fras and Bank is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Fras le SA and The Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Bank and Fras Le 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 Fras le SA are associated (or correlated) with Bank Of. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Bank has no effect on the direction of Fras Le i.e., Fras Le and Bank Of go up and down completely randomly.
Pair Corralation between Fras Le and Bank Of
Assuming the 90 days trading horizon Fras Le is expected to generate 1.59 times less return on investment than Bank Of. In addition to that, Fras Le is 1.06 times more volatile than The Bank of. It trades about 0.11 of its total potential returns per unit of risk. The Bank of is currently generating about 0.18 per unit of volatility. If you would invest 20,904 in The Bank of on August 28, 2024 and sell it today you would earn a total of 26,476 from holding The Bank of or generate 126.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.62% |
| Values | Daily Returns |
Fras le SA vs. The Bank of
Performance |
| Timeline |
| Fras le SA |
| The Bank |
Fras Le and Bank Of Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fras Le and Bank Of
The main advantage of trading using opposite Fras Le and Bank Of positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fras Le position performs unexpectedly, Bank Of 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 Bank Of will offset losses from the drop in Bank Of's long position.The idea behind Fras le SA and The Bank of pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Bank Of vs. Cognizant Technology Solutions | Bank Of vs. Bread Financial Holdings | Bank Of vs. Raytheon Technologies | Bank Of vs. Palantir Technologies |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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