Correlation Between BNK Financial and DB Insurance

Can any of the company-specific risk be diversified away by investing in both BNK Financial and DB Insurance 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 BNK Financial and DB Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BNK Financial Group and DB Insurance Co, you can compare the effects of market volatilities on BNK Financial and DB Insurance 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 BNK Financial with a short position of DB Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of BNK Financial and DB Insurance.

Diversification Opportunities for BNK Financial and DB Insurance

-0.42

Correlation Coefficient

BNK Financial  DB Insurance

Very good diversification

The 3 months correlation between BNK and 005830 is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding BNK Financial Group and DB Insurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DB Insurance and BNK 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 BNK Financial Group are associated (or correlated) with DB Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DB Insurance has no effect on the direction of BNK Financial i.e., BNK Financial and DB Insurance go up and down completely randomly.

Pair Corralation between BNK Financial and DB Insurance

Assuming the 90 days trading horizon BNK Financial Group is expected to generate 0.82 times more return on investment than DB Insurance. However, BNK Financial Group is 1.23 times less risky than DB Insurance. It trades about 0.06 of its potential returns per unit of risk. DB Insurance Co is currently generating about -0.06 per unit of risk. If you would invest  964,000  in BNK Financial Group on September 24, 2024 and sell it today you would earn a total of  62,000  from holding BNK Financial Group or generate 6.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

BNK Financial Group  vs.  DB Insurance Co

BNK Financial Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BNK Financial Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BNK Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

DB Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DB Insurance Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with BNK Financial and DB Insurance

The main advantage of trading using opposite BNK Financial and DB Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BNK Financial position performs unexpectedly, DB Insurance 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 DB Insurance will offset losses from the drop in DB Insurance's long position.

The idea behind BNK Financial Group and DB Insurance Co 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.