Correlation Between Bank Central and Prospector Capital

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

Diversification Opportunities for Bank Central and Prospector Capital

-0.45

Correlation Coefficient

Bank Central  Prospector Capital

Very good diversification

The 3 months correlation between Bank and Prospector is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Prospector Capital Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prospector Capital Equity 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 Prospector Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prospector Capital Equity has no effect on the direction of Bank Central i.e., Bank Central and Prospector Capital go up and down completely randomly.

Pair Corralation between Bank Central and Prospector Capital

If you would invest  10.00  in Prospector Capital Equity on September 2, 2024 and sell it today you would earn a total of  0.00  from holding Prospector Capital Equity or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

Bank Central Asia  vs.  Prospector Capital Equity

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.

Prospector Capital Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prospector Capital Equity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Prospector Capital is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Bank Central and Prospector Capital

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

The idea behind Bank Central Asia and Prospector Capital Equity 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.