Correlation Between Central Industrial and Pesona Metro

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

Diversification Opportunities for Central Industrial and Pesona Metro

0.55

Correlation Coefficient

Central Industrial  Pesona Metro

Very weak diversification

The 3 months correlation between Central and Pesona is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Central Industrial Corp and Pesona Metro Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pesona Metro Holdings 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 Pesona Metro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pesona Metro Holdings has no effect on the direction of Central Industrial i.e., Central Industrial and Pesona Metro go up and down completely randomly.

Pair Corralation between Central Industrial and Pesona Metro

Assuming the 90 days trading horizon Central Industrial is expected to generate 4.75 times less return on investment than Pesona Metro. But when comparing it to its historical volatility, Central Industrial Corp is 3.37 times less risky than Pesona Metro. It trades about 0.11 of its potential returns per unit of risk. Pesona Metro Holdings is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  25.00  in Pesona Metro Holdings on September 25, 2024 and sell it today you would earn a total of  6.00  from holding Pesona Metro Holdings or generate 24.0% return on investment over 90 days.

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

Central Industrial Corp  vs.  Pesona Metro Holdings

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.

Pesona Metro Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pesona Metro Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Pesona Metro disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Central Industrial and Pesona Metro

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

The idea behind Central Industrial Corp and Pesona Metro Holdings 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..