Correlation Between Bank Central and Aeroports

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

Diversification Opportunities for Bank Central and Aeroports

0.66

Correlation Coefficient

Bank Central  Aeroports

Poor diversification

The 3 months correlation between Bank and Aeroports is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Aeroports de Paris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeroports de Paris 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 Aeroports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeroports de Paris has no effect on the direction of Bank Central i.e., Bank Central and Aeroports go up and down completely randomly.

Pair Corralation between Bank Central and Aeroports

Assuming the 90 days horizon Bank Central Asia is expected to under-perform the Aeroports. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Central Asia is 1.34 times less risky than Aeroports. The pink sheet trades about -0.08 of its potential returns per unit of risk. The Aeroports de Paris is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  12,446  in Aeroports de Paris on September 5, 2024 and sell it today you would lose (1,026) from holding Aeroports de Paris or give up 8.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Bank Central Asia  vs.  Aeroports de Paris

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 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.

Aeroports de Paris

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeroports de Paris has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Bank Central and Aeroports

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

The idea behind Bank Central Asia and Aeroports de Paris 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.