Correlation Between Bank Central and Computershare

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

Diversification Opportunities for Bank Central and Computershare

-0.83

Correlation Coefficient

Bank Central  Computershare

Pay attention - limited upside

The 3 months correlation between Bank and Computershare is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Computershare Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computershare ADR 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 Computershare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computershare ADR has no effect on the direction of Bank Central i.e., Bank Central and Computershare go up and down completely randomly.

Pair Corralation between Bank Central and Computershare

Assuming the 90 days horizon Bank Central Asia is expected to under-perform the Computershare. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Central Asia is 1.09 times less risky than Computershare. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Computershare Ltd ADR is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,874  in Computershare Ltd ADR on September 2, 2024 and sell it today you would earn a total of  208.00  from holding Computershare Ltd ADR or generate 11.1% return on investment over 90 days.

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

Bank Central Asia  vs.  Computershare Ltd ADR

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.

Computershare ADR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Computershare Ltd ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Computershare may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bank Central and Computershare

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

The idea behind Bank Central Asia and Computershare Ltd ADR 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.