Correlation Between Centerra Gold and Transat AT

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

By analyzing existing cross correlation between Centerra Gold and Transat AT, you can compare the effects of market volatilities on Centerra Gold and Transat AT 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 Centerra Gold with a short position of Transat AT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centerra Gold and Transat AT.

Diversification Opportunities for Centerra Gold and Transat AT

-0.32

Correlation Coefficient

Centerra Gold  Transat AT

Very good diversification

The 3 months correlation between Centerra and Transat is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Centerra Gold and Transat AT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transat AT and Centerra Gold 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 Centerra Gold are associated (or correlated) with Transat AT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transat AT has no effect on the direction of Centerra Gold i.e., Centerra Gold and Transat AT go up and down completely randomly.

Pair Corralation between Centerra Gold and Transat AT

Assuming the 90 days horizon Centerra Gold is expected to under-perform the Transat AT. But the stock apears to be less risky and, when comparing its historical volatility, Centerra Gold is 1.11 times less risky than Transat AT. The stock trades about -0.09 of its potential returns per unit of risk. The Transat AT is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  178.00  in Transat AT on September 23, 2024 and sell it today you would earn a total of  5.00  from holding Transat AT or generate 2.81% return on investment over 90 days.

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

Centerra Gold  vs.  Transat AT

Centerra Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centerra Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Transat AT

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Transat AT are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Transat AT is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Centerra Gold and Transat AT

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

The idea behind Centerra Gold and Transat AT 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.