Correlation Between Bank Central and Ace Hardware
Can any of the company-specific risk be diversified away by investing in both Bank Central and Ace Hardware 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 Ace Hardware 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 Ace Hardware Indonesia, you can compare the effects of market volatilities on Bank Central and Ace Hardware 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 Ace Hardware. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Central and Ace Hardware.
Diversification Opportunities for Bank Central and Ace Hardware
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and Ace is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Ace Hardware Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ace Hardware Indonesia 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 Ace Hardware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ace Hardware Indonesia has no effect on the direction of Bank Central i.e., Bank Central and Ace Hardware go up and down completely randomly.
Pair Corralation between Bank Central and Ace Hardware
Assuming the 90 days trading horizon Bank Central is expected to generate 1.19 times less return on investment than Ace Hardware. But when comparing it to its historical volatility, Bank Central Asia is 1.7 times less risky than Ace Hardware. It trades about 0.05 of its potential returns per unit of risk. Ace Hardware Indonesia is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 66,793 in Ace Hardware Indonesia on September 3, 2024 and sell it today you would earn a total of 9,207 from holding Ace Hardware Indonesia or generate 13.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank Central Asia vs. Ace Hardware Indonesia
Performance |
| Timeline |
| Bank Central Asia |
| Ace Hardware Indonesia |
Bank Central and Ace Hardware Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Central and Ace Hardware
The main advantage of trading using opposite Bank Central and Ace Hardware positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Central position performs unexpectedly, Ace Hardware 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 Ace Hardware will offset losses from the drop in Ace Hardware's long position.| Bank Central vs. Paninvest Tbk | Bank Central vs. Mitra Pinasthika Mustika | Bank Central vs. Jakarta Int Hotels | Bank Central vs. Asuransi Harta Aman |
| Ace Hardware vs. Mitra Pinasthika Mustika | Ace Hardware vs. Jakarta Int Hotels | Ace Hardware vs. Asuransi Harta Aman | Ace Hardware vs. Indosterling Technomedia Tbk |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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