Correlation Between Bank Central and NextSource Materials
Can any of the company-specific risk be diversified away by investing in both Bank Central and NextSource Materials 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 NextSource Materials 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 NextSource Materials, you can compare the effects of market volatilities on Bank Central and NextSource Materials 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 NextSource Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Central and NextSource Materials.
Diversification Opportunities for Bank Central and NextSource Materials
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and NextSource is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and NextSource Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextSource Materials 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 NextSource Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextSource Materials has no effect on the direction of Bank Central i.e., Bank Central and NextSource Materials go up and down completely randomly.
Pair Corralation between Bank Central and NextSource Materials
Assuming the 90 days horizon Bank Central Asia is expected to generate 0.45 times more return on investment than NextSource Materials. However, Bank Central Asia is 2.22 times less risky than NextSource Materials. It trades about -0.05 of its potential returns per unit of risk. NextSource Materials is currently generating about -0.11 per unit of risk. If you would invest 1,664 in Bank Central Asia on September 6, 2024 and sell it today you would lose (95.00) from holding Bank Central Asia or give up 5.71% 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. NextSource Materials
Performance |
Timeline |
Bank Central Asia |
NextSource Materials |
Bank Central and NextSource Materials Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bank Central and NextSource Materials
The main advantage of trading using opposite Bank Central and NextSource Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Central position performs unexpectedly, NextSource Materials 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 NextSource Materials will offset losses from the drop in NextSource Materials' long position.Bank Central vs. First Hawaiian | Bank Central vs. Central Pacific Financial | Bank Central vs. Territorial Bancorp | Bank Central vs. Comerica |
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Check out your portfolio center.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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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