Correlation Between PESTECH International and Central Industrial
Can any of the company-specific risk be diversified away by investing in both PESTECH International and Central Industrial 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 PESTECH International and Central Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PESTECH International Bhd and Central Industrial Corp, you can compare the effects of market volatilities on PESTECH International and Central Industrial 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 PESTECH International with a short position of Central Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of PESTECH International and Central Industrial.
Diversification Opportunities for PESTECH International and Central Industrial
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between PESTECH and Central is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding PESTECH International Bhd and Central Industrial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Industrial Corp and PESTECH International 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 PESTECH International Bhd are associated (or correlated) with Central Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Industrial Corp has no effect on the direction of PESTECH International i.e., PESTECH International and Central Industrial go up and down completely randomly.
Pair Corralation between PESTECH International and Central Industrial
Assuming the 90 days trading horizon PESTECH International Bhd is expected to under-perform the Central Industrial. In addition to that, PESTECH International is 1.88 times more volatile than Central Industrial Corp. It trades about -0.01 of its total potential returns per unit of risk. Central Industrial Corp is currently generating about 0.12 per unit of volatility. If you would invest 23.00 in Central Industrial Corp on September 2, 2024 and sell it today you would earn a total of 62.00 from holding Central Industrial Corp or generate 269.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PESTECH International Bhd vs. Central Industrial Corp
Performance |
| Timeline |
| PESTECH International Bhd |
| Central Industrial Corp |
PESTECH International and Central Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PESTECH International and Central Industrial
The main advantage of trading using opposite PESTECH International and Central Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PESTECH International position performs unexpectedly, Central Industrial 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 Central Industrial will offset losses from the drop in Central Industrial's long position.The idea behind PESTECH International Bhd and Central Industrial Corp 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.| Central Industrial vs. JAKS Resources Bhd | Central Industrial vs. PESTECH International Bhd | Central Industrial vs. Tadmax Resources Berhad |
Check out your portfolio center.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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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