Correlation Between Eternal Energy and Central Retail

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

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

Diversification Opportunities for Eternal Energy and Central Retail

0.39

Correlation Coefficient

Eternal Energy  Central Retail

Weak diversification

The 3 months correlation between Eternal and Central is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Eternal Energy Public and Central Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Retail and Eternal Energy 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 Eternal Energy Public are associated (or correlated) with Central Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Retail has no effect on the direction of Eternal Energy i.e., Eternal Energy and Central Retail go up and down completely randomly.

Pair Corralation between Eternal Energy and Central Retail

Assuming the 90 days horizon Eternal Energy Public is expected to generate 5.09 times more return on investment than Central Retail. However, Eternal Energy is 5.09 times more volatile than Central Retail. It trades about 0.24 of its potential returns per unit of risk. Central Retail is currently generating about 0.05 per unit of risk. If you would invest  17.00  in Eternal Energy Public on September 14, 2024 and sell it today you would earn a total of  39.00  from holding Eternal Energy Public or generate 229.41% return on investment over 90 days.

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

Eternal Energy Public  vs.  Central Retail

Eternal Energy Public

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eternal Energy Public are ranked lower than 19 (%) 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.

Central Retail

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Central Retail are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Central Retail is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Eternal Energy and Central Retail

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

The idea behind Eternal Energy Public and Central Retail 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.