Correlation Between Central Plaza and SE Education

Can any of the company-specific risk be diversified away by investing in both Central Plaza and SE Education 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 SE Education 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 SE Education Public, you can compare the effects of market volatilities on Central Plaza and SE Education 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 SE Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Plaza and SE Education.

Diversification Opportunities for Central Plaza and SE Education

0.26

Correlation Coefficient

Central Plaza  SE Education

Modest diversification

The 3 months correlation between Central and SE-ED is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Central Plaza Hotel and SE Education Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SE Education Public 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 SE Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SE Education Public has no effect on the direction of Central Plaza i.e., Central Plaza and SE Education go up and down completely randomly.

Pair Corralation between Central Plaza and SE Education

Assuming the 90 days trading horizon Central Plaza Hotel is expected to generate 0.73 times more return on investment than SE Education. However, Central Plaza Hotel is 1.38 times less risky than SE Education. It trades about -0.03 of its potential returns per unit of risk. SE Education Public is currently generating about -0.03 per unit of risk. If you would invest  3,425  in Central Plaza Hotel on December 25, 2024 and sell it today you would lose (250.00) from holding Central Plaza Hotel or give up 7.3% of portfolio value over 90 days.

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

Central Plaza Hotel  vs.  SE Education Public

Central Plaza Hotel

Risk-Adjusted Performance

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 somewhat strong basic indicators, Central Plaza is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

SE Education Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days SE Education Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Central Plaza and SE Education

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

The idea behind Central Plaza Hotel and SE Education Public 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.