Correlation Between Central Securities and Dividend Income

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

By analyzing existing cross correlation between Central Securities and Dividend Income, you can compare the effects of market volatilities on Central Securities and Dividend Income 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 Dividend Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Securities and Dividend Income.

Diversification Opportunities for Central Securities and Dividend Income

0.0

Correlation Coefficient

Central Securities  Dividend Income

Pay attention - limited upside

The 3 months correlation between Central and Dividend is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Central Securities and Dividend Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dividend Income 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 Dividend Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dividend Income has no effect on the direction of Central Securities i.e., Central Securities and Dividend Income go up and down completely randomly.

Pair Corralation between Central Securities and Dividend Income

If you would invest (100.00) in Dividend Income on November 28, 2024 and sell it today you would earn a total of  100.00  from holding Dividend Income or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Central Securities  vs.  Dividend Income

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.

Dividend Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dividend Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Dividend Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Central Securities and Dividend Income

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

The idea behind Central Securities and Dividend Income 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 Global Correlations module to find global opportunities by holding instruments from different markets.