Correlation Between Bank Central and NuVista Energy

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

Diversification Opportunities for Bank Central and NuVista Energy

0.52

Correlation Coefficient

Bank Central  NuVista Energy

Very weak diversification

The 3 months correlation between Bank and NuVista is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and NuVista Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NuVista Energy 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 NuVista Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NuVista Energy has no effect on the direction of Bank Central i.e., Bank Central and NuVista Energy go up and down completely randomly.

Pair Corralation between Bank Central and NuVista Energy

Assuming the 90 days horizon Bank Central Asia is expected to under-perform the NuVista Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Central Asia is 1.05 times less risky than NuVista Energy. The pink sheet trades about -0.09 of its potential returns per unit of risk. The NuVista Energy is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  946.00  in NuVista Energy on December 29, 2024 and sell it today you would earn a total of  4.00  from holding NuVista Energy or generate 0.42% return on investment over 90 days.

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

Bank Central Asia  vs.  NuVista Energy

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.

NuVista Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NuVista Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NuVista Energy 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 NuVista Energy

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

The idea behind Bank Central Asia and NuVista Energy 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.