Correlation Between Bank Central and Fast Food
Can any of the company-specific risk be diversified away by investing in both Bank Central and Fast Food 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 Fast Food 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 Fast Food Indonesia, you can compare the effects of market volatilities on Bank Central and Fast Food 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 Fast Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Central and Fast Food.
Diversification Opportunities for Bank Central and Fast Food
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Fast is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Fast Food Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Food 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 Fast Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Food Indonesia has no effect on the direction of Bank Central i.e., Bank Central and Fast Food go up and down completely randomly.
Pair Corralation between Bank Central and Fast Food
Assuming the 90 days trading horizon Bank Central Asia is expected to generate 0.58 times more return on investment than Fast Food. However, Bank Central Asia is 1.71 times less risky than Fast Food. It trades about -0.05 of its potential returns per unit of risk. Fast Food Indonesia is currently generating about -0.14 per unit of risk. If you would invest 915,000 in Bank Central Asia on November 27, 2024 and sell it today you would lose (22,500) from holding Bank Central Asia or give up 2.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank Central Asia vs. Fast Food Indonesia
Performance |
| Timeline |
| Bank Central Asia |
| Fast Food Indonesia |
Bank Central and Fast Food Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Central and Fast Food
The main advantage of trading using opposite Bank Central and Fast Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Central position performs unexpectedly, Fast Food 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 Fast Food will offset losses from the drop in Fast Food's long position.| Bank Central vs. Bank Rakyat Indonesia | Bank Central vs. Bank Mandiri Persero | Bank Central vs. Bank Negara Indonesia | Bank Central vs. Astra International Tbk |
| Fast Food vs. Hero Supermarket Tbk | Fast Food vs. Indoritel Makmur Internasional | Fast Food vs. Enseval Putra Megatrading | Fast Food vs. Fks Multi Agro |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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