Correlation Between Bank Central and Tigo Energy
Can any of the company-specific risk be diversified away by investing in both Bank Central and Tigo Energy 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 Tigo Energy 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 Tigo Energy, you can compare the effects of market volatilities on Bank Central and Tigo Energy 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 Tigo Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Central and Tigo Energy.
Diversification Opportunities for Bank Central and Tigo Energy
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Tigo is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Tigo Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tigo Energy 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 Tigo Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tigo Energy has no effect on the direction of Bank Central i.e., Bank Central and Tigo Energy go up and down completely randomly.
Pair Corralation between Bank Central and Tigo Energy
Assuming the 90 days horizon Bank Central Asia is expected to generate 0.18 times more return on investment than Tigo Energy. However, Bank Central Asia is 5.43 times less risky than Tigo Energy. It trades about 0.03 of its potential returns per unit of risk. Tigo Energy is currently generating about -0.03 per unit of risk. If you would invest 1,288 in Bank Central Asia on August 28, 2024 and sell it today you would earn a total of 262.00 from holding Bank Central Asia or generate 20.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank Central Asia vs. Tigo Energy
Performance |
| Timeline |
| Bank Central Asia |
| Tigo Energy |
Bank Central and Tigo Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Central and Tigo Energy
The main advantage of trading using opposite Bank Central and Tigo Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Central position performs unexpectedly, Tigo Energy 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 Tigo Energy will offset losses from the drop in Tigo Energy's long position.The idea behind Bank Central Asia and Tigo Energy 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.| Tigo Energy vs. CenterPoint Energy | Tigo Energy vs. NRG Energy | Tigo Energy vs. Black Hills | Tigo Energy vs. Everspin Technologies |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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