Correlation Between United Bank and Soneri Bank
Can any of the company-specific risk be diversified away by investing in both United Bank and Soneri 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 United Bank and Soneri Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Bank and Soneri Bank, you can compare the effects of market volatilities on United Bank and Soneri 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 United Bank with a short position of Soneri Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Bank and Soneri Bank.
Diversification Opportunities for United Bank and Soneri Bank
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and Soneri is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding United Bank and Soneri Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soneri Bank and United Bank 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 United Bank are associated (or correlated) with Soneri Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soneri Bank has no effect on the direction of United Bank i.e., United Bank and Soneri Bank go up and down completely randomly.
Pair Corralation between United Bank and Soneri Bank
Assuming the 90 days trading horizon United Bank is expected to generate 0.79 times more return on investment than Soneri Bank. However, United Bank is 1.27 times less risky than Soneri Bank. It trades about 0.28 of its potential returns per unit of risk. Soneri Bank is currently generating about 0.15 per unit of risk. If you would invest 15,002 in United Bank on August 28, 2024 and sell it today you would earn a total of 19,600 from holding United Bank or generate 130.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Bank vs. Soneri Bank
Performance |
| Timeline |
| United Bank |
| Soneri Bank |
United Bank and Soneri Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Bank and Soneri Bank
The main advantage of trading using opposite United Bank and Soneri Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Bank position performs unexpectedly, Soneri 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 Soneri Bank will offset losses from the drop in Soneri Bank's long position.| United Bank vs. Amreli Steels | United Bank vs. Quice Food Industries | United Bank vs. Orient Rental Modaraba | United Bank vs. Air Link Communication |
| Soneri Bank vs. Masood Textile Mills | Soneri Bank vs. Fauji Foods | Soneri Bank vs. KSB Pumps | Soneri Bank vs. Mari Petroleum |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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