Correlation Between Bank Central and Chalice Brands

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

Diversification Opportunities for Bank Central and Chalice Brands

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Bank and Chalice is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Chalice Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chalice 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 Chalice Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chalice Brands has no effect on the direction of Bank Central i.e., Bank Central and Chalice Brands go up and down completely randomly.

Pair Corralation between Bank Central and Chalice Brands

Assuming the 90 days horizon Bank Central Asia is expected to generate 0.12 times more return on investment than Chalice Brands. However, Bank Central Asia is 8.01 times less risky than Chalice Brands. It trades about -0.04 of its potential returns per unit of risk. Chalice Brands is currently generating about -0.17 per unit of risk. If you would invest  1,664  in Bank Central Asia on September 17, 2024 and sell it today you would lose (92.00) from holding Bank Central Asia or give up 5.53% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.44%
ValuesDaily Returns

Bank Central Asia  vs.  Chalice Brands

 Performance 
       Timeline  
Bank Central Asia 

Risk-Adjusted Performance

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Weak
 
Strong
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.
Chalice Brands 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Chalice Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators 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.

Bank Central and Chalice Brands Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bank Central and Chalice Brands

The main advantage of trading using opposite Bank Central and Chalice Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Central position performs unexpectedly, Chalice 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 Chalice Brands will offset losses from the drop in Chalice Brands' long position.
The idea behind Bank Central Asia and Chalice 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.
Check out your portfolio center.
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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