Correlation Between Retail Food and Centaurus Metals

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

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

Diversification Opportunities for Retail Food and Centaurus Metals

-0.26

Correlation Coefficient

Retail Food  Centaurus Metals

Very good diversification

The 3 months correlation between Retail and Centaurus is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Retail Food Group and Centaurus Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centaurus Metals and Retail Food 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 Retail Food Group are associated (or correlated) with Centaurus Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centaurus Metals has no effect on the direction of Retail Food i.e., Retail Food and Centaurus Metals go up and down completely randomly.

Pair Corralation between Retail Food and Centaurus Metals

Assuming the 90 days trading horizon Retail Food Group is expected to generate 0.63 times more return on investment than Centaurus Metals. However, Retail Food Group is 1.59 times less risky than Centaurus Metals. It trades about -0.02 of its potential returns per unit of risk. Centaurus Metals is currently generating about -0.07 per unit of risk. If you would invest  268.00  in Retail Food Group on September 26, 2024 and sell it today you would lose (13.00) from holding Retail Food Group or give up 4.85% of portfolio value over 90 days.

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

Retail Food Group  vs.  Centaurus Metals

Retail Food Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Retail Food Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Retail Food is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Centaurus Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centaurus Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary 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.

Pair Trading with Retail Food and Centaurus Metals

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

The idea behind Retail Food Group and Centaurus Metals 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.