Correlation Between Central Securities and Azimut Holding

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

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

Diversification Opportunities for Central Securities and Azimut Holding

0.4

Correlation Coefficient

Central Securities  Azimut Holding

Very weak diversification

The 3 months correlation between Central and Azimut is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Central Securities and Azimut Holding SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azimut Holding SpA and Central Securities 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 Securities are associated (or correlated) with Azimut Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azimut Holding SpA has no effect on the direction of Central Securities i.e., Central Securities and Azimut Holding go up and down completely randomly.

Pair Corralation between Central Securities and Azimut Holding

Considering the 90-day investment horizon Central Securities is expected to under-perform the Azimut Holding. But the stock apears to be less risky and, when comparing its historical volatility, Central Securities is 4.84 times less risky than Azimut Holding. The stock trades about -0.02 of its potential returns per unit of risk. The Azimut Holding SpA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,392  in Azimut Holding SpA on December 29, 2024 and sell it today you would earn a total of  598.00  from holding Azimut Holding SpA or generate 25.0% return on investment over 90 days.

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

Central Securities  vs.  Azimut Holding SpA

Central Securities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Central Securities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Central Securities is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Azimut Holding SpA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Azimut Holding SpA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical indicators, Azimut Holding reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Central Securities and Azimut Holding

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

The idea behind Central Securities and Azimut Holding SpA 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.