Correlation Between Bank Central and Real Luck

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

Diversification Opportunities for Bank Central and Real Luck

0.71

Correlation Coefficient

Bank Central  Real Luck

Poor diversification

The 3 months correlation between Bank and Real is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Real Luck Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Luck Group 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 Real Luck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Luck Group has no effect on the direction of Bank Central i.e., Bank Central and Real Luck go up and down completely randomly.

Pair Corralation between Bank Central and Real Luck

Assuming the 90 days horizon Bank Central is expected to generate 96.31 times less return on investment than Real Luck. But when comparing it to its historical volatility, Bank Central Asia is 49.32 times less risky than Real Luck. It trades about 0.03 of its potential returns per unit of risk. Real Luck Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  8.99  in Real Luck Group on September 4, 2024 and sell it today you would lose (8.82) from holding Real Luck Group or give up 98.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Bank Central Asia  vs.  Real Luck Group

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.

Real Luck Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Real Luck Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent technical and fundamental indicators, Real Luck reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Central and Real Luck

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

The idea behind Bank Central Asia and Real Luck Group 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.