Correlation Between Bank Central and Northland Power
Can any of the company-specific risk be diversified away by investing in both Bank Central and Northland Power 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 Northland Power 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 Northland Power, you can compare the effects of market volatilities on Bank Central and Northland Power 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 Northland Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Central and Northland Power.
Diversification Opportunities for Bank Central and Northland Power
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Northland is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Northland Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northland Power 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 Northland Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northland Power has no effect on the direction of Bank Central i.e., Bank Central and Northland Power go up and down completely randomly.
Pair Corralation between Bank Central and Northland Power
Assuming the 90 days horizon Bank Central Asia is expected to under-perform the Northland Power. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Central Asia is 1.67 times less risky than Northland Power. The pink sheet trades about -0.22 of its potential returns per unit of risk. The Northland Power is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 1,522 in Northland Power on September 1, 2024 and sell it today you would lose (82.00) from holding Northland Power or give up 5.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Bank Central Asia vs. Northland Power
Performance |
| Timeline |
| Bank Central Asia |
| Northland Power |
Bank Central and Northland Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Central and Northland Power
The main advantage of trading using opposite Bank Central and Northland Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Central position performs unexpectedly, Northland Power 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 Northland Power will offset losses from the drop in Northland Power's long position.| Bank Central vs. Bank Mandiri Persero | Bank Central vs. Piraeus Bank SA | Bank Central vs. Kasikornbank Public Co | Bank Central vs. Turkiye Garanti Bankasi |
| Northland Power vs. Nextera Energy | Northland Power vs. Consumers Energy | Northland Power vs. Duke Energy | Northland Power vs. Centrais Electricas Brasileiras |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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