Correlation Between Bank Central and Brother Industries

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

Diversification Opportunities for Bank Central and Brother Industries

-0.74

Correlation Coefficient

Bank Central  Brother Industries

Pay attention - limited upside

The 3 months correlation between Bank and Brother is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Brother Industries Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brother Industries 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 Brother Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brother Industries has no effect on the direction of Bank Central i.e., Bank Central and Brother Industries go up and down completely randomly.

Pair Corralation between Bank Central and Brother Industries

Assuming the 90 days horizon Bank Central Asia is expected to under-perform the Brother Industries. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Central Asia is 1.08 times less risky than Brother Industries. The pink sheet trades about -0.15 of its potential returns per unit of risk. The Brother Industries Ltd is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,348  in Brother Industries Ltd on December 26, 2024 and sell it today you would earn a total of  567.00  from holding Brother Industries Ltd or generate 16.94% return on investment over 90 days.

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

Bank Central Asia  vs.  Brother Industries Ltd

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 weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Brother Industries

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brother Industries Ltd are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical indicators, Brother Industries showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Central and Brother Industries

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

The idea behind Bank Central Asia and Brother Industries Ltd 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 Commodity Directory module to find actively traded commodities issued by global exchanges.