Correlation Between Bank Central and Peninsula Energy

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

Diversification Opportunities for Bank Central and Peninsula Energy

-0.46

Correlation Coefficient

Bank Central  Peninsula Energy

Very good diversification

The 3 months correlation between Bank and Peninsula is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Peninsula Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peninsula 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 Peninsula Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peninsula Energy has no effect on the direction of Bank Central i.e., Bank Central and Peninsula Energy go up and down completely randomly.

Pair Corralation between Bank Central and Peninsula Energy

Assuming the 90 days horizon Bank Central Asia is expected to under-perform the Peninsula Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Central Asia is 83.58 times less risky than Peninsula Energy. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Peninsula Energy is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  5.30  in Peninsula Energy on September 3, 2024 and sell it today you would earn a total of  73.70  from holding Peninsula Energy or generate 1390.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.75%
Values	Daily Returns

Bank Central Asia  vs.  Peninsula Energy

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.

Peninsula Energy

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Peninsula Energy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Peninsula Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Central and Peninsula Energy

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

The idea behind Bank Central Asia and Peninsula 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..