Correlation Between CENTRAL RETAIL and Eternal Energy

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

By analyzing existing cross correlation between CENTRAL RETAIL P and Eternal Energy Public, you can compare the effects of market volatilities on CENTRAL RETAIL and Eternal Energy 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 RETAIL with a short position of Eternal Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of CENTRAL RETAIL and Eternal Energy.

Diversification Opportunities for CENTRAL RETAIL and Eternal Energy

-0.75

Correlation Coefficient

CENTRAL RETAIL  Eternal Energy

Pay attention - limited upside

The 3 months correlation between CENTRAL and Eternal is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding CENTRAL RETAIL P and Eternal Energy Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eternal Energy Public and CENTRAL RETAIL 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 RETAIL P are associated (or correlated) with Eternal Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eternal Energy Public has no effect on the direction of CENTRAL RETAIL i.e., CENTRAL RETAIL and Eternal Energy go up and down completely randomly.

Pair Corralation between CENTRAL RETAIL and Eternal Energy

Assuming the 90 days trading horizon CENTRAL RETAIL P is expected to under-perform the Eternal Energy. But the stock apears to be less risky and, when comparing its historical volatility, CENTRAL RETAIL P is 6.0 times less risky than Eternal Energy. The stock trades about -0.13 of its potential returns per unit of risk. The Eternal Energy Public is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Eternal Energy Public on September 13, 2024 and sell it today you would earn a total of  45.00  from holding Eternal Energy Public or generate 264.71% return on investment over 90 days.

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

CENTRAL RETAIL P  vs.  Eternal Energy Public

CENTRAL RETAIL P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CENTRAL RETAIL P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Eternal Energy Public

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eternal Energy Public are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Eternal Energy disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CENTRAL RETAIL and Eternal Energy

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

The idea behind CENTRAL RETAIL P and Eternal Energy Public 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.