Correlation Between Bank Central and Tri-County Financial

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

Diversification Opportunities for Bank Central and Tri-County Financial

-0.47

Correlation Coefficient

Bank Central  Tri-County Financial

Very good diversification

The 3 months correlation between Bank and Tri-County is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Tri County Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tri County Financial 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 Tri-County Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tri County Financial has no effect on the direction of Bank Central i.e., Bank Central and Tri-County Financial go up and down completely randomly.

Pair Corralation between Bank Central and Tri-County Financial

Assuming the 90 days horizon Bank Central Asia is expected to under-perform the Tri-County Financial. In addition to that, Bank Central is 3.58 times more volatile than Tri County Financial Group. It trades about -0.1 of its total potential returns per unit of risk. Tri County Financial Group is currently generating about 0.01 per unit of volatility. If you would invest  4,475  in Tri County Financial Group on December 18, 2024 and sell it today you would earn a total of  6.00  from holding Tri County Financial Group or generate 0.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Bank Central Asia  vs.  Tri County Financial Group

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.

Tri County Financial

Risk-Adjusted Performance

Weak

Over the last 90 days Tri County Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Tri-County Financial 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 Tri-County Financial

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

The idea behind Bank Central Asia and Tri County Financial Group 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.