Correlation Between BLUELINX HLDGS and Centrotec

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

By analyzing existing cross correlation between BLUELINX HLDGS DL 01 and Centrotec SE, you can compare the effects of market volatilities on BLUELINX HLDGS and Centrotec 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 BLUELINX HLDGS with a short position of Centrotec. Check out your portfolio center. Please also check ongoing floating volatility patterns of BLUELINX HLDGS and Centrotec.

Diversification Opportunities for BLUELINX HLDGS and Centrotec

0.05

Correlation Coefficient

BLUELINX HLDGS  Centrotec

Significant diversification

The 3 months correlation between BLUELINX and Centrotec is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding BLUELINX HLDGS DL 01 and Centrotec SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrotec SE and BLUELINX HLDGS 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 BLUELINX HLDGS DL 01 are associated (or correlated) with Centrotec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrotec SE has no effect on the direction of BLUELINX HLDGS i.e., BLUELINX HLDGS and Centrotec go up and down completely randomly.

Pair Corralation between BLUELINX HLDGS and Centrotec

Assuming the 90 days trading horizon BLUELINX HLDGS DL 01 is expected to generate 2.34 times more return on investment than Centrotec. However, BLUELINX HLDGS is 2.34 times more volatile than Centrotec SE. It trades about 0.05 of its potential returns per unit of risk. Centrotec SE is currently generating about 0.05 per unit of risk. If you would invest  7,950  in BLUELINX HLDGS DL 01 on September 22, 2024 and sell it today you would earn a total of  2,250  from holding BLUELINX HLDGS DL 01 or generate 28.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.64%
Values	Daily Returns

BLUELINX HLDGS DL 01  vs.  Centrotec SE

BLUELINX HLDGS DL

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BLUELINX HLDGS DL 01 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, BLUELINX HLDGS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with BLUELINX HLDGS and Centrotec

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

The idea behind BLUELINX HLDGS DL 01 and Centrotec SE 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.