Correlation Between Central Retail and Asset World

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

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

Diversification Opportunities for Central Retail and Asset World

0.67

Correlation Coefficient

Central Retail  Asset World

Poor diversification

The 3 months correlation between Central and Asset is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Central Retail and Asset World Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asset World Corp and Central Retail 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 Retail are associated (or correlated) with Asset World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asset World Corp has no effect on the direction of Central Retail i.e., Central Retail and Asset World go up and down completely randomly.

Pair Corralation between Central Retail and Asset World

Assuming the 90 days trading horizon Central Retail is expected to generate 1.39 times more return on investment than Asset World. However, Central Retail is 1.39 times more volatile than Asset World Corp. It trades about -0.17 of its potential returns per unit of risk. Asset World Corp is currently generating about -0.28 per unit of risk. If you would invest  3,400  in Central Retail on December 30, 2024 and sell it today you would lose (850.00) from holding Central Retail or give up 25.0% of portfolio value over 90 days.

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

Central Retail  vs.  Asset World Corp

Central Retail

Risk-Adjusted Performance

Very Weak

Over the last 90 days Central Retail has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Asset World Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Asset World Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Central Retail and Asset World

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

The idea behind Central Retail and Asset World Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.