Correlation Between Bank Central and FG Merger

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

Diversification Opportunities for Bank Central and FG Merger

-0.4

Correlation Coefficient

Bank Central  FG Merger

Very good diversification

The 3 months correlation between Bank and FGMCU is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and FG Merger II in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FG Merger II 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 FG Merger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FG Merger II has no effect on the direction of Bank Central i.e., Bank Central and FG Merger go up and down completely randomly.

Pair Corralation between Bank Central and FG Merger

Assuming the 90 days horizon Bank Central Asia is expected to under-perform the FG Merger. In addition to that, Bank Central is 10.13 times more volatile than FG Merger II. It trades about -0.15 of its total potential returns per unit of risk. FG Merger II is currently generating about -0.15 per unit of volatility. If you would invest  983.00  in FG Merger II on December 20, 2024 and sell it today you would lose (9.00) from holding FG Merger II or give up 0.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	59.32%
Values	Daily Returns

Bank Central Asia  vs.  FG Merger II

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.

FG Merger II

Risk-Adjusted Performance

Very Weak

Over the last 90 days FG Merger II has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, FG Merger is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bank Central and FG Merger

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

The idea behind Bank Central Asia and FG Merger II 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.