Correlation Between EnTie Commercial and Central Reinsurance

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

By analyzing existing cross correlation between EnTie Commercial Bank and Central Reinsurance Corp, you can compare the effects of market volatilities on EnTie Commercial and Central Reinsurance 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 EnTie Commercial with a short position of Central Reinsurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of EnTie Commercial and Central Reinsurance.

Diversification Opportunities for EnTie Commercial and Central Reinsurance

0.39

Correlation Coefficient

EnTie Commercial  Central Reinsurance

Weak diversification

The 3 months correlation between EnTie and Central is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding EnTie Commercial Bank and Central Reinsurance Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Reinsurance Corp and EnTie Commercial 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 EnTie Commercial Bank are associated (or correlated) with Central Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Reinsurance Corp has no effect on the direction of EnTie Commercial i.e., EnTie Commercial and Central Reinsurance go up and down completely randomly.

Pair Corralation between EnTie Commercial and Central Reinsurance

Assuming the 90 days trading horizon EnTie Commercial Bank is expected to under-perform the Central Reinsurance. But the stock apears to be less risky and, when comparing its historical volatility, EnTie Commercial Bank is 1.19 times less risky than Central Reinsurance. The stock trades about 0.0 of its potential returns per unit of risk. The Central Reinsurance Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,760  in Central Reinsurance Corp on October 5, 2024 and sell it today you would earn a total of  825.00  from holding Central Reinsurance Corp or generate 46.87% return on investment over 90 days.

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

EnTie Commercial Bank  vs.  Central Reinsurance Corp

EnTie Commercial Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EnTie Commercial Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, EnTie Commercial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Central Reinsurance Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Central Reinsurance Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Central Reinsurance is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with EnTie Commercial and Central Reinsurance

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

The idea behind EnTie Commercial Bank and Central Reinsurance Corp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.