Correlation Between BANK CENTRAL and WOLFDEN RES

Can any of the company-specific risk be diversified away by investing in both BANK CENTRAL and WOLFDEN RES 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 WOLFDEN RES 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 WOLFDEN RES P, you can compare the effects of market volatilities on BANK CENTRAL and WOLFDEN RES 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 WOLFDEN RES. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK CENTRAL and WOLFDEN RES.

Diversification Opportunities for BANK CENTRAL and WOLFDEN RES

-0.16

Correlation Coefficient

BANK CENTRAL  WOLFDEN RES

Good diversification

The 3 months correlation between BANK and WOLFDEN is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding BANK CENTRAL ASIA and WOLFDEN RES P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WOLFDEN RES P 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 WOLFDEN RES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WOLFDEN RES P has no effect on the direction of BANK CENTRAL i.e., BANK CENTRAL and WOLFDEN RES go up and down completely randomly.

Pair Corralation between BANK CENTRAL and WOLFDEN RES

Assuming the 90 days trading horizon BANK CENTRAL is expected to generate 204.29 times less return on investment than WOLFDEN RES. But when comparing it to its historical volatility, BANK CENTRAL ASIA is 18.0 times less risky than WOLFDEN RES. It trades about 0.01 of its potential returns per unit of risk. WOLFDEN RES P is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2.70  in WOLFDEN RES P on October 10, 2024 and sell it today you would lose (0.30) from holding WOLFDEN RES P or give up 11.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

BANK CENTRAL ASIA  vs.  WOLFDEN RES P

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 fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

WOLFDEN RES P

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WOLFDEN RES P are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WOLFDEN RES reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BANK CENTRAL and WOLFDEN RES

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

The idea behind BANK CENTRAL ASIA and WOLFDEN RES P 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.