Correlation Between Pontex Polyblend and Central Reinsurance

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

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

Diversification Opportunities for Pontex Polyblend and Central Reinsurance

-0.59

Correlation Coefficient

Pontex Polyblend  Central Reinsurance

Excellent diversification

The 3 months correlation between Pontex and Central is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Pontex Polyblend CoLtd 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 Pontex Polyblend 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 Pontex Polyblend CoLtd 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 Pontex Polyblend i.e., Pontex Polyblend and Central Reinsurance go up and down completely randomly.

Pair Corralation between Pontex Polyblend and Central Reinsurance

Assuming the 90 days trading horizon Pontex Polyblend CoLtd is expected to generate 2.33 times more return on investment than Central Reinsurance. However, Pontex Polyblend is 2.33 times more volatile than Central Reinsurance Corp. It trades about 0.07 of its potential returns per unit of risk. Central Reinsurance Corp is currently generating about 0.04 per unit of risk. If you would invest  1,227  in Pontex Polyblend CoLtd on October 23, 2024 and sell it today you would earn a total of  943.00  from holding Pontex Polyblend CoLtd or generate 76.85% return on investment over 90 days.

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

Pontex Polyblend CoLtd  vs.  Central Reinsurance Corp

Pontex Polyblend CoLtd

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pontex Polyblend CoLtd are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Pontex Polyblend showed solid returns over the last few months and may actually be approaching a breakup point.

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 Pontex Polyblend and Central Reinsurance

The main advantage of trading using opposite Pontex Polyblend and Central Reinsurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pontex Polyblend 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 Pontex Polyblend CoLtd 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.