Correlation Between Bank Central and Medical Facilities

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

Diversification Opportunities for Bank Central and Medical Facilities

-0.35

Correlation Coefficient

Bank Central  Medical Facilities

Very good diversification

The 3 months correlation between Bank and Medical is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Medical Facilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Facilities 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 Medical Facilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Facilities has no effect on the direction of Bank Central i.e., Bank Central and Medical Facilities go up and down completely randomly.

Pair Corralation between Bank Central and Medical Facilities

Assuming the 90 days horizon Bank Central Asia is expected to under-perform the Medical Facilities. In addition to that, Bank Central is 1.01 times more volatile than Medical Facilities. It trades about -0.09 of its total potential returns per unit of risk. Medical Facilities is currently generating about 0.03 per unit of volatility. If you would invest  1,079  in Medical Facilities on December 29, 2024 and sell it today you would earn a total of  32.00  from holding Medical Facilities or generate 2.97% return on investment over 90 days.

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

Bank Central Asia  vs.  Medical Facilities

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.

Medical Facilities

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Facilities are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Medical Facilities 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 Medical Facilities

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

The idea behind Bank Central Asia and Medical Facilities 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.