Correlation Between Centaur Bci and S A P

Can any of the company-specific risk be diversified away by investing in both Centaur Bci and S A P 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 Centaur Bci and S A P into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Centaur Bci Balanced and Sappi, you can compare the effects of market volatilities on Centaur Bci and S A P 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 Centaur Bci with a short position of S A P. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centaur Bci and S A P.

Diversification Opportunities for Centaur Bci and S A P

0.03

Correlation Coefficient

Centaur Bci  S A P

Significant diversification

The 3 months correlation between Centaur and SAP is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Centaur Bci Balanced and Sappi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sappi and Centaur Bci 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 Centaur Bci Balanced are associated (or correlated) with S A P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sappi has no effect on the direction of Centaur Bci i.e., Centaur Bci and S A P go up and down completely randomly.

Pair Corralation between Centaur Bci and S A P

Assuming the 90 days trading horizon Centaur Bci Balanced is expected to generate 0.73 times more return on investment than S A P. However, Centaur Bci Balanced is 1.38 times less risky than S A P. It trades about -0.24 of its potential returns per unit of risk. Sappi is currently generating about -0.24 per unit of risk. If you would invest  245.00  in Centaur Bci Balanced on October 10, 2024 and sell it today you would lose (9.00) from holding Centaur Bci Balanced or give up 3.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Centaur Bci Balanced  vs.  Sappi

Centaur Bci Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centaur Bci Balanced has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Centaur Bci is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sappi

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sappi are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, S A P is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Centaur Bci and S A P

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

The idea behind Centaur Bci Balanced and Sappi 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.