Correlation Between Central Securities and Tri Continental

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

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

Diversification Opportunities for Central Securities and Tri Continental

0.95

Correlation Coefficient

Central Securities  Tri Continental

Almost no diversification

The 3 months correlation between Central and Tri is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Central Securities and Tri Continental Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tri Continental Closed 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 Tri Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tri Continental Closed has no effect on the direction of Central Securities i.e., Central Securities and Tri Continental go up and down completely randomly.

Pair Corralation between Central Securities and Tri Continental

Considering the 90-day investment horizon Central Securities is expected to generate 0.93 times more return on investment than Tri Continental. However, Central Securities is 1.08 times less risky than Tri Continental. It trades about -0.02 of its potential returns per unit of risk. Tri Continental Closed is currently generating about -0.04 per unit of risk. If you would invest  4,605  in Central Securities on December 26, 2024 and sell it today you would lose (42.00) from holding Central Securities or give up 0.91% of portfolio value over 90 days.

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

Central Securities  vs.  Tri Continental Closed

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.

Tri Continental Closed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tri Continental Closed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Tri Continental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Central Securities and Tri Continental

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

The idea behind Central Securities and Tri Continental Closed 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.