Correlation Between Bank Central and Metrodata Electronics

Can any of the company-specific risk be diversified away by investing in both Bank Central and Metrodata Electronics 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 Metrodata Electronics 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 Metrodata Electronics Tbk, you can compare the effects of market volatilities on Bank Central and Metrodata Electronics 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 Metrodata Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Central and Metrodata Electronics.

Diversification Opportunities for Bank Central and Metrodata Electronics

0.69

Correlation Coefficient

Bank Central  Metrodata Electronics

Poor diversification

The 3 months correlation between Bank and Metrodata is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Metrodata Electronics Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metrodata Electronics Tbk 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 Metrodata Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metrodata Electronics Tbk has no effect on the direction of Bank Central i.e., Bank Central and Metrodata Electronics go up and down completely randomly.

Pair Corralation between Bank Central and Metrodata Electronics

Assuming the 90 days trading horizon Bank Central Asia is expected to generate 0.67 times more return on investment than Metrodata Electronics. However, Bank Central Asia is 1.48 times less risky than Metrodata Electronics. It trades about 0.05 of its potential returns per unit of risk. Metrodata Electronics Tbk is currently generating about 0.0 per unit of risk. If you would invest  783,800  in Bank Central Asia on February 3, 2024 and sell it today you would earn a total of  176,200  from holding Bank Central Asia or generate 22.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.73%
Values	Daily Returns

Bank Central Asia  vs.  Metrodata Electronics Tbk

Bank Central Asia

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Central Asia are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Bank Central is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Metrodata Electronics Tbk

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Metrodata Electronics Tbk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Metrodata Electronics may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Bank Central and Metrodata Electronics

The main advantage of trading using opposite Bank Central and Metrodata Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Central position performs unexpectedly, Metrodata Electronics 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 Metrodata Electronics will offset losses from the drop in Metrodata Electronics' long position.

The idea behind Bank Central Asia and Metrodata Electronics Tbk 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.

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 CEOs Directory module to screen CEOs from public companies around the world.