Correlation Between Century Small and Pro Blend

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

By analyzing existing cross correlation between Century Small Cap and Pro Blend Servative Term, you can compare the effects of market volatilities on Century Small and Pro Blend 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 Century Small with a short position of Pro Blend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Small and Pro Blend.

Diversification Opportunities for Century Small and Pro Blend

-0.21

Correlation Coefficient

Century Small  Pro Blend

Very good diversification

The 3 months correlation between Century and Pro is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Century Small Cap and Pro Blend Servative Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pro Blend Servative and Century Small 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 Century Small Cap are associated (or correlated) with Pro Blend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pro Blend Servative has no effect on the direction of Century Small i.e., Century Small and Pro Blend go up and down completely randomly.

Pair Corralation between Century Small and Pro Blend

Assuming the 90 days horizon Century Small Cap is expected to generate 4.11 times more return on investment than Pro Blend. However, Century Small is 4.11 times more volatile than Pro Blend Servative Term. It trades about 0.07 of its potential returns per unit of risk. Pro Blend Servative Term is currently generating about 0.12 per unit of risk. If you would invest  3,290  in Century Small Cap on September 12, 2024 and sell it today you would earn a total of  984.00  from holding Century Small Cap or generate 29.91% return on investment over 90 days.

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

Century Small Cap  vs.  Pro Blend Servative Term

Century Small Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Century Small Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Century Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pro Blend Servative

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pro Blend Servative Term has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Pro Blend is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Century Small and Pro Blend

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

The idea behind Century Small Cap and Pro Blend Servative Term 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.