Correlation Between IShares Global and BNK Banking

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

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

Diversification Opportunities for IShares Global and BNK Banking

0.54

Correlation Coefficient

IShares Global  BNK Banking

Very weak diversification

The 3 months correlation between IShares and BNK is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Healthcare and BNK Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNK Banking and IShares Global 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 iShares Global Healthcare 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 IShares Global i.e., IShares Global and BNK Banking go up and down completely randomly.

Pair Corralation between IShares Global and BNK Banking

Assuming the 90 days trading horizon iShares Global Healthcare is expected to under-perform the BNK Banking. But the etf apears to be less risky and, when comparing its historical volatility, iShares Global Healthcare is 4.16 times less risky than BNK Banking. The etf trades about -0.1 of its potential returns per unit of risk. The BNK Banking is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  35.00  in BNK Banking on September 23, 2024 and sell it today you would lose (2.00) from holding BNK Banking or give up 5.71% of portfolio value over 90 days.

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

iShares Global Healthcare  vs.  BNK Banking

iShares Global Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 IShares Global and BNK Banking

The main advantage of trading using opposite IShares Global and BNK Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Global 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 iShares Global Healthcare 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.