Correlation Between Bank of Queensland and Environmental

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

By analyzing existing cross correlation between Bank of Queensland and The Environmental Group, you can compare the effects of market volatilities on Bank of Queensland and Environmental 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 Bank of Queensland with a short position of Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Queensland and Environmental.

Diversification Opportunities for Bank of Queensland and Environmental

-0.23

Correlation Coefficient

Bank of Queensland  Environmental

Very good diversification

The 3 months correlation between Bank and Environmental is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Queensland and The Environmental Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Environmental and Bank of Queensland 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 Bank of Queensland are associated (or correlated) with Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Environmental has no effect on the direction of Bank of Queensland i.e., Bank of Queensland and Environmental go up and down completely randomly.

Pair Corralation between Bank of Queensland and Environmental

Assuming the 90 days trading horizon Bank of Queensland is expected to generate 0.18 times more return on investment than Environmental. However, Bank of Queensland is 5.62 times less risky than Environmental. It trades about -0.08 of its potential returns per unit of risk. The Environmental Group is currently generating about -0.1 per unit of risk. If you would invest  10,660  in Bank of Queensland on September 13, 2024 and sell it today you would lose (325.00) from holding Bank of Queensland or give up 3.05% of portfolio value over 90 days.

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

Bank of Queensland  vs.  The Environmental Group

Bank of Queensland

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank of Queensland has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Bank of Queensland is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

The Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Environmental Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Bank of Queensland and Environmental

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

The idea behind Bank of Queensland and The Environmental Group 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.