Correlation Between Bank Central and Partner Communications

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

Diversification Opportunities for Bank Central and Partner Communications

0.76

Correlation Coefficient

Bank Central  Partner Communications

Poor diversification

The 3 months correlation between Bank and Partner is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Partner Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Partner Communications 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 Partner Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Partner Communications has no effect on the direction of Bank Central i.e., Bank Central and Partner Communications go up and down completely randomly.

Pair Corralation between Bank Central and Partner Communications

Assuming the 90 days horizon Bank Central Asia is expected to generate 0.33 times more return on investment than Partner Communications. However, Bank Central Asia is 3.03 times less risky than Partner Communications. It trades about 0.02 of its potential returns per unit of risk. Partner Communications is currently generating about -0.07 per unit of risk. If you would invest  1,307  in Bank Central Asia on September 22, 2024 and sell it today you would earn a total of  159.00  from holding Bank Central Asia or generate 12.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	22.98%
Values	Daily Returns

Bank Central Asia  vs.  Partner Communications

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 unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Partner Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Partner Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Partner Communications is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Bank Central and Partner Communications

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

The idea behind Bank Central Asia and Partner Communications 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.