Correlation Between Centrotec and TRAVIS PERKINS

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

By analyzing existing cross correlation between Centrotec SE and TRAVIS PERKINS LS 1, you can compare the effects of market volatilities on Centrotec and TRAVIS PERKINS 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 Centrotec with a short position of TRAVIS PERKINS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centrotec and TRAVIS PERKINS.

Diversification Opportunities for Centrotec and TRAVIS PERKINS

-0.3

Correlation Coefficient

Centrotec  TRAVIS PERKINS

Very good diversification

The 3 months correlation between Centrotec and TRAVIS is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Centrotec SE and TRAVIS PERKINS LS 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAVIS PERKINS LS and Centrotec 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 Centrotec SE are associated (or correlated) with TRAVIS PERKINS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAVIS PERKINS LS has no effect on the direction of Centrotec i.e., Centrotec and TRAVIS PERKINS go up and down completely randomly.

Pair Corralation between Centrotec and TRAVIS PERKINS

Assuming the 90 days trading horizon Centrotec SE is expected to generate 0.67 times more return on investment than TRAVIS PERKINS. However, Centrotec SE is 1.49 times less risky than TRAVIS PERKINS. It trades about 0.09 of its potential returns per unit of risk. TRAVIS PERKINS LS 1 is currently generating about -0.22 per unit of risk. If you would invest  4,960  in Centrotec SE on September 22, 2024 and sell it today you would earn a total of  340.00  from holding Centrotec SE or generate 6.85% return on investment over 90 days.

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

Centrotec SE  vs.  TRAVIS PERKINS LS 1

Centrotec SE

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Centrotec SE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Centrotec may actually be approaching a critical reversion point that can send shares even higher in January 2025.

TRAVIS PERKINS LS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TRAVIS PERKINS LS 1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Centrotec and TRAVIS PERKINS

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

The idea behind Centrotec SE and TRAVIS PERKINS LS 1 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.