Correlation Between Betagro PCL and Central Retail

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

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

Diversification Opportunities for Betagro PCL and Central Retail

-0.53

Correlation Coefficient

Betagro PCL  Central Retail

Excellent diversification

The 3 months correlation between Betagro and Central is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Betagro PCL and Central Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Retail and Betagro PCL 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 Betagro PCL are associated (or correlated) with Central Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Retail has no effect on the direction of Betagro PCL i.e., Betagro PCL and Central Retail go up and down completely randomly.

Pair Corralation between Betagro PCL and Central Retail

Assuming the 90 days trading horizon Betagro PCL is expected to under-perform the Central Retail. But the stock apears to be less risky and, when comparing its historical volatility, Betagro PCL is 1.51 times less risky than Central Retail. The stock trades about -0.32 of its potential returns per unit of risk. The Central Retail is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3,375  in Central Retail on October 8, 2024 and sell it today you would lose (75.00) from holding Central Retail or give up 2.22% of portfolio value over 90 days.

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

Betagro PCL  vs.  Central Retail

Betagro PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Betagro PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Central Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Central Retail has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Central Retail is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Betagro PCL and Central Retail

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

The idea behind Betagro PCL and Central Retail 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.