Correlation Between Megapolitan Developments and Bank Central
Can any of the company-specific risk be diversified away by investing in both Megapolitan Developments and Bank Central 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 Megapolitan Developments and Bank Central into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Megapolitan Developments Tbk and Bank Central Asia, you can compare the effects of market volatilities on Megapolitan Developments and Bank Central 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 Megapolitan Developments with a short position of Bank Central. Check out your portfolio center. Please also check ongoing floating volatility patterns of Megapolitan Developments and Bank Central.
Diversification Opportunities for Megapolitan Developments and Bank Central
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Megapolitan and Bank is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Megapolitan Developments Tbk and Bank Central Asia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Central Asia and Megapolitan Developments 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 Megapolitan Developments Tbk are associated (or correlated) with Bank Central. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Central Asia has no effect on the direction of Megapolitan Developments i.e., Megapolitan Developments and Bank Central go up and down completely randomly.
Pair Corralation between Megapolitan Developments and Bank Central
Assuming the 90 days trading horizon Megapolitan Developments Tbk is expected to under-perform the Bank Central. In addition to that, Megapolitan Developments is 1.79 times more volatile than Bank Central Asia. It trades about -0.46 of its total potential returns per unit of risk. Bank Central Asia is currently generating about -0.27 per unit of volatility. If you would invest 1,007,500 in Bank Central Asia on January 24, 2024 and sell it today you would lose (67,500) from holding Bank Central Asia or give up 6.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 93.33% |
| Values | Daily Returns |
Megapolitan Developments Tbk vs. Bank Central Asia
Performance |
| Timeline |
| Megapolitan Developments |
| Bank Central Asia |
Megapolitan Developments and Bank Central Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Megapolitan Developments and Bank Central
The main advantage of trading using opposite Megapolitan Developments and Bank Central positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Megapolitan Developments position performs unexpectedly, Bank Central 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 Bank Central will offset losses from the drop in Bank Central's long position.The idea behind Megapolitan Developments Tbk and Bank Central Asia 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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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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