Correlation Between Central Plaza and Digital Telecommunicatio

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

By analyzing existing cross correlation between Central Plaza Hotel and Digital Telecommunications Infrastructure, you can compare the effects of market volatilities on Central Plaza and Digital Telecommunicatio 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 Central Plaza with a short position of Digital Telecommunicatio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Plaza and Digital Telecommunicatio.

Diversification Opportunities for Central Plaza and Digital Telecommunicatio

0.75

Correlation Coefficient

Central Plaza  Digital Telecommunicatio

Poor diversification

The 3 months correlation between Central and Digital is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Central Plaza Hotel and Digital Telecommunications Inf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Telecommunicatio and Central Plaza 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 Central Plaza Hotel are associated (or correlated) with Digital Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Telecommunicatio has no effect on the direction of Central Plaza i.e., Central Plaza and Digital Telecommunicatio go up and down completely randomly.

Pair Corralation between Central Plaza and Digital Telecommunicatio

Assuming the 90 days trading horizon Central Plaza Hotel is expected to under-perform the Digital Telecommunicatio. In addition to that, Central Plaza is 2.64 times more volatile than Digital Telecommunications Infrastructure. It trades about -0.14 of its total potential returns per unit of risk. Digital Telecommunications Infrastructure is currently generating about -0.16 per unit of volatility. If you would invest  898.00  in Digital Telecommunications Infrastructure on October 22, 2024 and sell it today you would lose (68.00) from holding Digital Telecommunications Infrastructure or give up 7.57% of portfolio value over 90 days.

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

Central Plaza Hotel  vs.  Digital Telecommunications Inf

Central Plaza Hotel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Central Plaza Hotel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Digital Telecommunicatio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digital Telecommunications Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Central Plaza and Digital Telecommunicatio

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

The idea behind Central Plaza Hotel and Digital Telecommunications Infrastructure 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.