Correlation Between Peninsula Energy and Centuria Industrial

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

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

Diversification Opportunities for Peninsula Energy and Centuria Industrial

0.76

Correlation Coefficient

Peninsula Energy  Centuria Industrial

Poor diversification

The 3 months correlation between Peninsula and Centuria is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Peninsula Energy and Centuria Industrial Reit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centuria Industrial Reit and Peninsula 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 Peninsula Energy are associated (or correlated) with Centuria Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centuria Industrial Reit has no effect on the direction of Peninsula Energy i.e., Peninsula Energy and Centuria Industrial go up and down completely randomly.

Pair Corralation between Peninsula Energy and Centuria Industrial

Assuming the 90 days trading horizon Peninsula Energy is expected to under-perform the Centuria Industrial. In addition to that, Peninsula Energy is 6.0 times more volatile than Centuria Industrial Reit. It trades about -0.07 of its total potential returns per unit of risk. Centuria Industrial Reit is currently generating about -0.24 per unit of volatility. If you would invest  325.00  in Centuria Industrial Reit on September 17, 2024 and sell it today you would lose (39.00) from holding Centuria Industrial Reit or give up 12.0% of portfolio value over 90 days.

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

Peninsula Energy  vs.  Centuria Industrial Reit

Peninsula Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Peninsula Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Centuria Industrial Reit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centuria Industrial Reit has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Peninsula Energy and Centuria Industrial

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

The idea behind Peninsula Energy and Centuria Industrial 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.