Correlation Between KOBE STEEL and Preferred Bank
Can any of the company-specific risk be diversified away by investing in both KOBE STEEL and Preferred Bank 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 KOBE STEEL and Preferred Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KOBE STEEL LTD and Preferred Bank, you can compare the effects of market volatilities on KOBE STEEL and Preferred Bank 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 KOBE STEEL with a short position of Preferred Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of KOBE STEEL and Preferred Bank.
Diversification Opportunities for KOBE STEEL and Preferred Bank
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between KOBE and Preferred is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding KOBE STEEL LTD and Preferred Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Preferred Bank and KOBE STEEL 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 KOBE STEEL LTD are associated (or correlated) with Preferred Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Preferred Bank has no effect on the direction of KOBE STEEL i.e., KOBE STEEL and Preferred Bank go up and down completely randomly.
Pair Corralation between KOBE STEEL and Preferred Bank
Assuming the 90 days trading horizon KOBE STEEL is expected to generate 1.05 times less return on investment than Preferred Bank. But when comparing it to its historical volatility, KOBE STEEL LTD is 1.23 times less risky than Preferred Bank. It trades about 0.24 of its potential returns per unit of risk. Preferred Bank is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 8,125 in Preferred Bank on November 5, 2024 and sell it today you would earn a total of 575.00 from holding Preferred Bank or generate 7.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KOBE STEEL LTD vs. Preferred Bank
Performance |
| Timeline |
| KOBE STEEL LTD |
| Preferred Bank |
KOBE STEEL and Preferred Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KOBE STEEL and Preferred Bank
The main advantage of trading using opposite KOBE STEEL and Preferred Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KOBE STEEL position performs unexpectedly, Preferred Bank 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 Preferred Bank will offset losses from the drop in Preferred Bank's long position.| KOBE STEEL vs. Gaztransport Technigaz SA | KOBE STEEL vs. Yuexiu Transport Infrastructure | KOBE STEEL vs. National Beverage Corp | KOBE STEEL vs. BII Railway Transportation |
| Preferred Bank vs. POSBO UNSPADRS20YC1 | Preferred Bank vs. Postal Savings Bank | Preferred Bank vs. Oversea Chinese Banking | Preferred Bank vs. UNICREDIT SPA ADR |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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