Correlation Between CENTRAL RETAIL and Pato Chemical

Can any of the company-specific risk be diversified away by investing in both CENTRAL RETAIL and Pato Chemical 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 Pato Chemical 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 Pato Chemical Industry, you can compare the effects of market volatilities on CENTRAL RETAIL and Pato Chemical 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 Pato Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of CENTRAL RETAIL and Pato Chemical.

Diversification Opportunities for CENTRAL RETAIL and Pato Chemical

0.21

Correlation Coefficient

CENTRAL RETAIL  Pato Chemical

Modest diversification

The 3 months correlation between CENTRAL and Pato is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding CENTRAL RETAIL P and Pato Chemical Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pato Chemical Industry 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 Pato Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pato Chemical Industry has no effect on the direction of CENTRAL RETAIL i.e., CENTRAL RETAIL and Pato Chemical go up and down completely randomly.

Pair Corralation between CENTRAL RETAIL and Pato Chemical

Assuming the 90 days trading horizon CENTRAL RETAIL P is expected to under-perform the Pato Chemical. In addition to that, CENTRAL RETAIL is 5.92 times more volatile than Pato Chemical Industry. It trades about -0.23 of its total potential returns per unit of risk. Pato Chemical Industry is currently generating about -0.5 per unit of volatility. If you would invest  865.00  in Pato Chemical Industry on September 24, 2024 and sell it today you would lose (40.00) from holding Pato Chemical Industry or give up 4.62% of portfolio value over 90 days.

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

CENTRAL RETAIL P  vs.  Pato Chemical Industry

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.

Pato Chemical Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pato Chemical Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with CENTRAL RETAIL and Pato Chemical

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

The idea behind CENTRAL RETAIL P and Pato Chemical Industry 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 CEOs Directory module to screen CEOs from public companies around the world.