Correlation Between Bank Central and Amada

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

Diversification Opportunities for Bank Central and Amada

-0.59

Correlation Coefficient

Bank Central  Amada

Excellent diversification

The 3 months correlation between Bank and Amada is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Amada Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amada 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 Amada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amada has no effect on the direction of Bank Central i.e., Bank Central and Amada go up and down completely randomly.

Pair Corralation between Bank Central and Amada

Assuming the 90 days horizon Bank Central Asia is expected to under-perform the Amada. In addition to that, Bank Central is 8.49 times more volatile than Amada Co. It trades about -0.08 of its total potential returns per unit of risk. Amada Co is currently generating about 0.13 per unit of volatility. If you would invest  946.00  in Amada Co on December 28, 2024 and sell it today you would earn a total of  19.00  from holding Amada Co or generate 2.01% return on investment over 90 days.

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

Bank Central Asia  vs.  Amada Co

Bank Central Asia

Risk-Adjusted Performance

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.

Amada

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amada Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Amada is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bank Central and Amada

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

The idea behind Bank Central Asia and Amada Co 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.