Correlation Between Bank Central and Origin Energy

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

Diversification Opportunities for Bank Central and Origin Energy

-0.57

Correlation Coefficient

Bank Central  Origin Energy

Excellent diversification

The 3 months correlation between Bank and Origin is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Origin Energy Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin 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 Origin Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Origin Energy has no effect on the direction of Bank Central i.e., Bank Central and Origin Energy go up and down completely randomly.

Pair Corralation between Bank Central and Origin Energy

Assuming the 90 days horizon Bank Central Asia is expected to under-perform the Origin Energy. In addition to that, Bank Central is 1.2 times more volatile than Origin Energy Ltd. It trades about -0.06 of its total potential returns per unit of risk. Origin Energy Ltd is currently generating about 0.15 per unit of volatility. If you would invest  641.00  in Origin Energy Ltd on September 4, 2024 and sell it today you would earn a total of  78.00  from holding Origin Energy Ltd or generate 12.17% return on investment over 90 days.

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

Bank Central Asia  vs.  Origin Energy Ltd

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.

Origin Energy

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Origin Energy Ltd are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Origin Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bank Central and Origin Energy

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

The idea behind Bank Central Asia and Origin Energy Ltd 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.