Correlation Between Truxton and Bank Central

Can any of the company-specific risk be diversified away by investing in both Truxton and Bank Central 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 Truxton and Bank Central into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Truxton and Bank Central Asia, you can compare the effects of market volatilities on Truxton and Bank Central 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 Truxton with a short position of Bank Central. Check out your portfolio center. Please also check ongoing floating volatility patterns of Truxton and Bank Central.

Diversification Opportunities for Truxton and Bank Central

-0.71

Correlation Coefficient

Truxton  Bank Central

Pay attention - limited upside

The 3 months correlation between Truxton and Bank is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Truxton and Bank Central Asia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Central Asia and Truxton 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 Truxton are associated (or correlated) with Bank Central. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Central Asia has no effect on the direction of Truxton i.e., Truxton and Bank Central go up and down completely randomly.

Pair Corralation between Truxton and Bank Central

Given the investment horizon of 90 days Truxton is expected to generate 0.87 times more return on investment than Bank Central. However, Truxton is 1.16 times less risky than Bank Central. It trades about 0.01 of its potential returns per unit of risk. Bank Central Asia is currently generating about -0.13 per unit of risk. If you would invest  7,401  in Truxton on December 19, 2024 and sell it today you would lose (1.00) from holding Truxton or give up 0.01% of portfolio value over 90 days.

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

Truxton  vs.  Bank Central Asia

Truxton

Risk-Adjusted Performance

Very Weak

Over the last 90 days Truxton has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Truxton is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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 weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Truxton and Bank Central

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

The idea behind Truxton and Bank Central Asia 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.