Correlation Between Bank Central and Pekin Life

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

Diversification Opportunities for Bank Central and Pekin Life

-0.62

Correlation Coefficient

Bank Central  Pekin Life

Excellent diversification

The 3 months correlation between Bank and Pekin is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Pekin Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pekin Life Insurance 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 Pekin Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pekin Life Insurance has no effect on the direction of Bank Central i.e., Bank Central and Pekin Life go up and down completely randomly.

Pair Corralation between Bank Central and Pekin Life

Assuming the 90 days horizon Bank Central Asia is expected to under-perform the Pekin Life. In addition to that, Bank Central is 6.1 times more volatile than Pekin Life Insurance. It trades about -0.04 of its total potential returns per unit of risk. Pekin Life Insurance is currently generating about 0.13 per unit of volatility. If you would invest  1,151  in Pekin Life Insurance on September 2, 2024 and sell it today you would earn a total of  24.00  from holding Pekin Life Insurance or generate 2.09% return on investment over 90 days.

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

Bank Central Asia  vs.  Pekin Life Insurance

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.

Pekin Life Insurance

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pekin Life Insurance are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Pekin Life is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Bank Central and Pekin Life

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

The idea behind Bank Central Asia and Pekin Life Insurance 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.