Correlation Between Central Industrial and Diversified Gateway

Can any of the company-specific risk be diversified away by investing in both Central Industrial and Diversified Gateway 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 Central Industrial and Diversified Gateway into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Central Industrial Corp and Diversified Gateway Solutions, you can compare the effects of market volatilities on Central Industrial and Diversified Gateway 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 Central Industrial with a short position of Diversified Gateway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Industrial and Diversified Gateway.

Diversification Opportunities for Central Industrial and Diversified Gateway

-0.34

Correlation Coefficient

Central Industrial  Diversified Gateway

Very good diversification

The 3 months correlation between Central and Diversified is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Central Industrial Corp and Diversified Gateway Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diversified Gateway and Central Industrial 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 Central Industrial Corp are associated (or correlated) with Diversified Gateway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diversified Gateway has no effect on the direction of Central Industrial i.e., Central Industrial and Diversified Gateway go up and down completely randomly.

Pair Corralation between Central Industrial and Diversified Gateway

Assuming the 90 days trading horizon Central Industrial is expected to generate 1.09 times less return on investment than Diversified Gateway. But when comparing it to its historical volatility, Central Industrial Corp is 5.01 times less risky than Diversified Gateway. It trades about 0.08 of its potential returns per unit of risk. Diversified Gateway Solutions is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Diversified Gateway Solutions on October 1, 2024 and sell it today you would earn a total of  0.00  from holding Diversified Gateway Solutions or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Central Industrial Corp  vs.  Diversified Gateway Solutions

Central Industrial Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Central Industrial Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Central Industrial is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Diversified Gateway

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Diversified Gateway Solutions are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Diversified Gateway is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Central Industrial and Diversified Gateway

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

The idea behind Central Industrial Corp and Diversified Gateway Solutions 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.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.