Correlation Between Ecofibre and BNK Banking

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

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

Diversification Opportunities for Ecofibre and BNK Banking

0.22

Correlation Coefficient

Ecofibre  BNK Banking

Modest diversification

The 3 months correlation between Ecofibre and BNK is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ecofibre and BNK Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNK Banking and Ecofibre 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 Ecofibre are associated (or correlated) with BNK Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNK Banking has no effect on the direction of Ecofibre i.e., Ecofibre and BNK Banking go up and down completely randomly.

Pair Corralation between Ecofibre and BNK Banking

Assuming the 90 days trading horizon Ecofibre is expected to under-perform the BNK Banking. In addition to that, Ecofibre is 1.62 times more volatile than BNK Banking. It trades about -0.35 of its total potential returns per unit of risk. BNK Banking is currently generating about -0.03 per unit of volatility. If you would invest  34.00  in BNK Banking on September 23, 2024 and sell it today you would lose (1.00) from holding BNK Banking or give up 2.94% of portfolio value over 90 days.

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

Ecofibre  vs.  BNK Banking

Ecofibre

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ecofibre are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Ecofibre may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BNK Banking

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BNK Banking has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, BNK Banking is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ecofibre and BNK Banking

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

The idea behind Ecofibre and BNK Banking 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.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.