Correlation Between Bank Central and Avant Brands

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

Diversification Opportunities for Bank Central and Avant Brands

0.78

Correlation Coefficient

Bank Central  Avant Brands

Poor diversification

The 3 months correlation between Bank and Avant is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Avant Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avant Brands 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 Avant Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avant Brands has no effect on the direction of Bank Central i.e., Bank Central and Avant Brands go up and down completely randomly.

Pair Corralation between Bank Central and Avant Brands

Assuming the 90 days horizon Bank Central Asia is expected to generate 0.44 times more return on investment than Avant Brands. However, Bank Central Asia is 2.3 times less risky than Avant Brands. It trades about -0.01 of its potential returns per unit of risk. Avant Brands is currently generating about -0.33 per unit of risk. If you would invest  1,664  in Bank Central Asia on September 12, 2024 and sell it today you would lose (27.00) from holding Bank Central Asia or give up 1.62% 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.  Avant Brands

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 fairly strong basic indicators, Bank Central is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Avant Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avant Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Bank Central and Avant Brands

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

The idea behind Bank Central Asia and Avant Brands 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.