Correlation Between PARAGON GROUP and Centrotec

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

By analyzing existing cross correlation between PARAGON GROUP and Centrotec SE, you can compare the effects of market volatilities on PARAGON GROUP and Centrotec 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 PARAGON GROUP with a short position of Centrotec. Check out your portfolio center. Please also check ongoing floating volatility patterns of PARAGON GROUP and Centrotec.

Diversification Opportunities for PARAGON GROUP and Centrotec

0.66

Correlation Coefficient

PARAGON GROUP  Centrotec

Poor diversification

The 3 months correlation between PARAGON and Centrotec is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding PARAGON GROUP and Centrotec SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrotec SE and PARAGON GROUP 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 PARAGON GROUP are associated (or correlated) with Centrotec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrotec SE has no effect on the direction of PARAGON GROUP i.e., PARAGON GROUP and Centrotec go up and down completely randomly.

Pair Corralation between PARAGON GROUP and Centrotec

Assuming the 90 days trading horizon PARAGON GROUP is expected to generate 2.8 times less return on investment than Centrotec. In addition to that, PARAGON GROUP is 1.25 times more volatile than Centrotec SE. It trades about 0.09 of its total potential returns per unit of risk. Centrotec SE is currently generating about 0.3 per unit of volatility. If you would invest  5,250  in Centrotec SE on December 29, 2024 and sell it today you would earn a total of  1,550  from holding Centrotec SE or generate 29.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

PARAGON GROUP  vs.  Centrotec SE

PARAGON GROUP

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PARAGON GROUP are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, PARAGON GROUP may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Centrotec SE

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Centrotec SE are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Centrotec displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PARAGON GROUP and Centrotec

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

The idea behind PARAGON GROUP and Centrotec SE 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.