Correlation Between Central Retail and SCB X

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

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

Diversification Opportunities for Central Retail and SCB X

0.43

Correlation Coefficient

Central Retail  SCB X

Very weak diversification

The 3 months correlation between Central and SCB is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Central Retail and SCB X Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCB X Public 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 SCB X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCB X Public has no effect on the direction of Central Retail i.e., Central Retail and SCB X go up and down completely randomly.

Pair Corralation between Central Retail and SCB X

Assuming the 90 days trading horizon Central Retail is expected to generate 1.47 times more return on investment than SCB X. However, Central Retail is 1.47 times more volatile than SCB X Public. It trades about 0.07 of its potential returns per unit of risk. SCB X Public is currently generating about -0.02 per unit of risk. If you would invest  3,375  in Central Retail on October 5, 2024 and sell it today you would earn a total of  50.00  from holding Central Retail or generate 1.48% return on investment over 90 days.

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

Central Retail  vs.  SCB X Public

Central Retail

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Central Retail are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Central Retail is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

SCB X Public

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SCB X Public are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, SCB X may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Central Retail and SCB X

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

The idea behind Central Retail and SCB X Public 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.