Correlation Between Central Pacific and Bank Central

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

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

Diversification Opportunities for Central Pacific and Bank Central

-0.65

Correlation Coefficient

Central Pacific  Bank Central

Excellent diversification

The 3 months correlation between Central and Bank is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Central Pacific Financial 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 Central Pacific 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 Central Pacific Financial 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 Central Pacific i.e., Central Pacific and Bank Central go up and down completely randomly.

Pair Corralation between Central Pacific and Bank Central

Considering the 90-day investment horizon Central Pacific Financial is expected to under-perform the Bank Central. But the stock apears to be less risky and, when comparing its historical volatility, Central Pacific Financial is 1.34 times less risky than Bank Central. The stock trades about -0.07 of its potential returns per unit of risk. The Bank Central Asia is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,605  in Bank Central Asia on September 12, 2024 and sell it today you would earn a total of  32.00  from holding Bank Central Asia or generate 1.99% return on investment over 90 days.

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

Central Pacific Financial  vs.  Bank Central Asia

Central Pacific Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Central Pacific Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Central Pacific reported solid returns over the last few months and may actually be approaching a breakup point.

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 fairly strong basic indicators, Bank Central is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Central Pacific and Bank Central

The main advantage of trading using opposite Central Pacific and Bank Central positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Pacific 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 Central Pacific Financial 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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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..