Correlation Between CENTRICA ADR and POLENERGIA

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

By analyzing existing cross correlation between CENTRICA ADR NEW and POLENERGIA SA ZY, you can compare the effects of market volatilities on CENTRICA ADR and POLENERGIA 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 CENTRICA ADR with a short position of POLENERGIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of CENTRICA ADR and POLENERGIA.

Diversification Opportunities for CENTRICA ADR and POLENERGIA

0.18

Correlation Coefficient

CENTRICA ADR  POLENERGIA

Average diversification

The 3 months correlation between CENTRICA and POLENERGIA is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding CENTRICA ADR NEW and POLENERGIA SA ZY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POLENERGIA SA ZY and CENTRICA ADR 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 CENTRICA ADR NEW are associated (or correlated) with POLENERGIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POLENERGIA SA ZY has no effect on the direction of CENTRICA ADR i.e., CENTRICA ADR and POLENERGIA go up and down completely randomly.

Pair Corralation between CENTRICA ADR and POLENERGIA

Assuming the 90 days trading horizon CENTRICA ADR NEW is expected to generate 0.79 times more return on investment than POLENERGIA. However, CENTRICA ADR NEW is 1.26 times less risky than POLENERGIA. It trades about 0.08 of its potential returns per unit of risk. POLENERGIA SA ZY is currently generating about 0.04 per unit of risk. If you would invest  537.00  in CENTRICA ADR NEW on September 19, 2024 and sell it today you would earn a total of  38.00  from holding CENTRICA ADR NEW or generate 7.08% return on investment over 90 days.

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

CENTRICA ADR NEW  vs.  POLENERGIA SA ZY

CENTRICA ADR NEW

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CENTRICA ADR NEW are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CENTRICA ADR may actually be approaching a critical reversion point that can send shares even higher in January 2025.

POLENERGIA SA ZY

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in POLENERGIA SA ZY are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, POLENERGIA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CENTRICA ADR and POLENERGIA

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

The idea behind CENTRICA ADR NEW and POLENERGIA SA ZY 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.