Correlation Between Bank Central and Central Natural

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

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

Diversification Opportunities for Bank Central and Central Natural

-0.55

Correlation Coefficient

Bank Central  Central Natural

Excellent diversification

The 3 months correlation between Bank and Central is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Central Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Natural Resources and Bank Central 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 Central Asia are associated (or correlated) with Central Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Natural Resources has no effect on the direction of Bank Central i.e., Bank Central and Central Natural go up and down completely randomly.

Pair Corralation between Bank Central and Central Natural

Assuming the 90 days horizon Bank Central is expected to generate 3.54 times less return on investment than Central Natural. But when comparing it to its historical volatility, Bank Central Asia is 1.38 times less risky than Central Natural. It trades about 0.03 of its potential returns per unit of risk. Central Natural Resources is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  412.00  in Central Natural Resources on February 28, 2024 and sell it today you would earn a total of  238.00  from holding Central Natural Resources or generate 57.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	77.37%
Values	Daily Returns

Bank Central Asia  vs.  Central Natural Resources

Bank Central Asia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Central Asia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of 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.

Central Natural Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Central Natural Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Central Natural is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Bank Central and Central Natural

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

The idea behind Bank Central Asia and Central Natural Resources 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.