Correlation Between BANK CENTRAL and Valero Energy

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

Diversification Opportunities for BANK CENTRAL and Valero Energy

-0.51

Correlation Coefficient

BANK CENTRAL  Valero Energy

Excellent diversification

The 3 months correlation between BANK and Valero is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding BANK CENTRAL ASIA and Valero Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valero 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 Valero Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valero Energy has no effect on the direction of BANK CENTRAL i.e., BANK CENTRAL and Valero Energy go up and down completely randomly.

Pair Corralation between BANK CENTRAL and Valero Energy

Assuming the 90 days trading horizon BANK CENTRAL ASIA is expected to generate 0.28 times more return on investment than Valero Energy. However, BANK CENTRAL ASIA is 3.54 times less risky than Valero Energy. It trades about 0.22 of its potential returns per unit of risk. Valero Energy is currently generating about -0.56 per unit of risk. If you would invest  59.00  in BANK CENTRAL ASIA on September 24, 2024 and sell it today you would earn a total of  1.00  from holding BANK CENTRAL ASIA or generate 1.69% return on investment over 90 days.

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

BANK CENTRAL ASIA  vs.  Valero 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 comparatively stable basic indicators, BANK CENTRAL is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Valero Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valero Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Valero Energy 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 Valero Energy

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

The idea behind BANK CENTRAL ASIA and Valero 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.