Correlation Between Bigbloc Construction and Centum Electronics

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

By analyzing existing cross correlation between Bigbloc Construction Limited and Centum Electronics Limited, you can compare the effects of market volatilities on Bigbloc Construction and Centum Electronics 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 Bigbloc Construction with a short position of Centum Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bigbloc Construction and Centum Electronics.

Diversification Opportunities for Bigbloc Construction and Centum Electronics

-0.16

Correlation Coefficient

Bigbloc Construction  Centum Electronics

Good diversification

The 3 months correlation between Bigbloc and Centum is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Bigbloc Construction Limited and Centum Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centum Electronics and Bigbloc Construction 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 Bigbloc Construction Limited are associated (or correlated) with Centum Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centum Electronics has no effect on the direction of Bigbloc Construction i.e., Bigbloc Construction and Centum Electronics go up and down completely randomly.

Pair Corralation between Bigbloc Construction and Centum Electronics

Assuming the 90 days trading horizon Bigbloc Construction Limited is expected to under-perform the Centum Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Bigbloc Construction Limited is 2.35 times less risky than Centum Electronics. The stock trades about -0.09 of its potential returns per unit of risk. The Centum Electronics Limited is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  171,315  in Centum Electronics Limited on October 5, 2024 and sell it today you would earn a total of  46,575  from holding Centum Electronics Limited or generate 27.19% return on investment over 90 days.

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

Bigbloc Construction Limited  vs.  Centum Electronics Limited

Bigbloc Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bigbloc Construction Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Bigbloc Construction is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Centum Electronics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Centum Electronics Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Centum Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bigbloc Construction and Centum Electronics

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

The idea behind Bigbloc Construction Limited and Centum Electronics Limited 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..