Correlation Between IMPERIAL TOBACCO and CENTURIA OFFICE

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

By analyzing existing cross correlation between IMPERIAL TOBACCO and CENTURIA OFFICE REIT, you can compare the effects of market volatilities on IMPERIAL TOBACCO and CENTURIA OFFICE 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 IMPERIAL TOBACCO with a short position of CENTURIA OFFICE. Check out your portfolio center. Please also check ongoing floating volatility patterns of IMPERIAL TOBACCO and CENTURIA OFFICE.

Diversification Opportunities for IMPERIAL TOBACCO and CENTURIA OFFICE

-0.72

Correlation Coefficient

IMPERIAL TOBACCO  CENTURIA OFFICE

Pay attention - limited upside

The 3 months correlation between IMPERIAL and CENTURIA is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO and CENTURIA OFFICE REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CENTURIA OFFICE REIT and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO are associated (or correlated) with CENTURIA OFFICE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CENTURIA OFFICE REIT has no effect on the direction of IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and CENTURIA OFFICE go up and down completely randomly.

Pair Corralation between IMPERIAL TOBACCO and CENTURIA OFFICE

Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to generate 0.71 times more return on investment than CENTURIA OFFICE. However, IMPERIAL TOBACCO is 1.41 times less risky than CENTURIA OFFICE. It trades about 0.28 of its potential returns per unit of risk. CENTURIA OFFICE REIT is currently generating about -0.19 per unit of risk. If you would invest  2,710  in IMPERIAL TOBACCO on September 23, 2024 and sell it today you would earn a total of  371.00  from holding IMPERIAL TOBACCO or generate 13.69% return on investment over 90 days.

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

IMPERIAL TOBACCO   vs.  CENTURIA OFFICE REIT

IMPERIAL TOBACCO

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IMPERIAL TOBACCO are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental drivers, IMPERIAL TOBACCO unveiled solid returns over the last few months and may actually be approaching a breakup point.

CENTURIA OFFICE REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CENTURIA OFFICE REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with IMPERIAL TOBACCO and CENTURIA OFFICE

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

The idea behind IMPERIAL TOBACCO and CENTURIA OFFICE REIT 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.