Correlation Between Bank Central and Karora Resources

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

Diversification Opportunities for Bank Central and Karora Resources

-0.8

Correlation Coefficient

Bank Central  Karora Resources

Pay attention - limited upside

The 3 months correlation between Bank and Karora is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Karora Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karora Resources 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 Karora Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karora Resources has no effect on the direction of Bank Central i.e., Bank Central and Karora Resources go up and down completely randomly.

Pair Corralation between Bank Central and Karora Resources

If you would invest  483.00  in Karora Resources on September 12, 2024 and sell it today you would earn a total of  0.00  from holding Karora Resources or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	1.59%
Values	Daily Returns

Bank Central Asia  vs.  Karora Resources

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.

Karora Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Karora Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Karora Resources 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 Karora Resources

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

The idea behind Bank Central Asia and Karora Resources 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.