Correlation Between Bank Central and Kimberly Clark

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

Diversification Opportunities for Bank Central and Kimberly Clark

0.74

Correlation Coefficient

Bank Central  Kimberly Clark

Poor diversification

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

Pair Corralation between Bank Central and Kimberly Clark

Assuming the 90 days horizon Bank Central Asia is expected to generate 1.02 times more return on investment than Kimberly Clark. However, Bank Central is 1.02 times more volatile than Kimberly Clark de Mexico. It trades about -0.04 of its potential returns per unit of risk. Kimberly Clark de Mexico is currently generating about -0.08 per unit of risk. If you would invest  1,664  in Bank Central Asia on September 17, 2024 and sell it today you would lose (92.00) from holding Bank Central Asia or give up 5.53% of portfolio value over 90 days.

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

Bank Central Asia  vs.  Kimberly Clark de Mexico

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.

Kimberly Clark de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kimberly Clark de Mexico has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Bank Central and Kimberly Clark

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

The idea behind Bank Central Asia and Kimberly Clark de Mexico 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.