Correlation Between 1 KIWIBANK and 475 RABOBANK17GMTN
Can any of the company-specific risk be diversified away by investing in both 1 KIWIBANK and 475 RABOBANK17GMTN 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 1 KIWIBANK and 475 RABOBANK17GMTN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 1 KIWIBANK 20 and 475 RABOBANK17GMTN, you can compare the effects of market volatilities on 1 KIWIBANK and 475 RABOBANK17GMTN 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 1 KIWIBANK with a short position of 475 RABOBANK17GMTN. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1 KIWIBANK and 475 RABOBANK17GMTN.
Diversification Opportunities for 1 KIWIBANK and 475 RABOBANK17GMTN
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between KIW13 and 475 is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding 1 KIWIBANK 20 and 475 RABOBANK17GMTN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 475 RABOBANK17GMTN and 1 KIWIBANK 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 1 KIWIBANK 20 are associated (or correlated) with 475 RABOBANK17GMTN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 475 RABOBANK17GMTN has no effect on the direction of 1 KIWIBANK i.e., 1 KIWIBANK and 475 RABOBANK17GMTN go up and down completely randomly.
Pair Corralation between 1 KIWIBANK and 475 RABOBANK17GMTN
If you would invest (100.00) in 475 RABOBANK17GMTN on September 19, 2024 and sell it today you would earn a total of 100.00 from holding 475 RABOBANK17GMTN or generate -100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
1 KIWIBANK 20 vs. 475 RABOBANK17GMTN
Performance |
| Timeline |
| 1 KIWIBANK 20 |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| 475 RABOBANK17GMTN |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
1 KIWIBANK and 475 RABOBANK17GMTN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 1 KIWIBANK and 475 RABOBANK17GMTN
The main advantage of trading using opposite 1 KIWIBANK and 475 RABOBANK17GMTN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 1 KIWIBANK position performs unexpectedly, 475 RABOBANK17GMTN 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 475 RABOBANK17GMTN will offset losses from the drop in 475 RABOBANK17GMTN's long position.The idea behind 1 KIWIBANK 20 and 475 RABOBANK17GMTN 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.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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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