Correlation Between Central Industrial and Public Bank

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

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

Diversification Opportunities for Central Industrial and Public Bank

-0.45

Correlation Coefficient

Central Industrial  Public Bank

Very good diversification

The 3 months correlation between Central and Public is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Central Industrial Corp and Public Bank Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Public Bank Bhd and Central Industrial 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 Central Industrial Corp are associated (or correlated) with Public Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Public Bank Bhd has no effect on the direction of Central Industrial i.e., Central Industrial and Public Bank go up and down completely randomly.

Pair Corralation between Central Industrial and Public Bank

Assuming the 90 days trading horizon Central Industrial Corp is expected to generate 0.62 times more return on investment than Public Bank. However, Central Industrial Corp is 1.61 times less risky than Public Bank. It trades about 0.11 of its potential returns per unit of risk. Public Bank Bhd is currently generating about -0.03 per unit of risk. If you would invest  82.00  in Central Industrial Corp on September 15, 2024 and sell it today you would earn a total of  4.00  from holding Central Industrial Corp or generate 4.88% return on investment over 90 days.

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

Central Industrial Corp  vs.  Public Bank Bhd

Central Industrial Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Central Industrial Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Central Industrial is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Public Bank Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Public Bank Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Public Bank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Central Industrial and Public Bank

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

The idea behind Central Industrial Corp and Public Bank Bhd 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.