Correlation Between Centrifuge and POCC

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

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

Diversification Opportunities for Centrifuge and POCC

0.54

Correlation Coefficient

Centrifuge  POCC

Very weak diversification

The 3 months correlation between Centrifuge and POCC is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Centrifuge and POCC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POCC and Centrifuge 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 Centrifuge are associated (or correlated) with POCC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POCC has no effect on the direction of Centrifuge i.e., Centrifuge and POCC go up and down completely randomly.

Pair Corralation between Centrifuge and POCC

Assuming the 90 days trading horizon Centrifuge is expected to generate 1.55 times less return on investment than POCC. In addition to that, Centrifuge is 1.44 times more volatile than POCC. It trades about 0.08 of its total potential returns per unit of risk. POCC is currently generating about 0.18 per unit of volatility. If you would invest  0.01  in POCC on September 1, 2024 and sell it today you would earn a total of  0.01  from holding POCC or generate 48.76% return on investment over 90 days.

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

Centrifuge  vs.  POCC

Centrifuge

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Centrifuge are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Centrifuge exhibited solid returns over the last few months and may actually be approaching a breakup point.

POCC

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in POCC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, POCC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Centrifuge and POCC

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

The idea behind Centrifuge and POCC 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.