Correlation Between Centaurus Metals and Seven West

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

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

Diversification Opportunities for Centaurus Metals and Seven West

0.15

Correlation Coefficient

Centaurus Metals  Seven West

Average diversification

The 3 months correlation between Centaurus and Seven is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Centaurus Metals and Seven West Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seven West Media and Centaurus Metals 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 Centaurus Metals are associated (or correlated) with Seven West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seven West Media has no effect on the direction of Centaurus Metals i.e., Centaurus Metals and Seven West go up and down completely randomly.

Pair Corralation between Centaurus Metals and Seven West

Assuming the 90 days trading horizon Centaurus Metals is expected to generate 1.33 times less return on investment than Seven West. But when comparing it to its historical volatility, Centaurus Metals is 1.24 times less risky than Seven West. It trades about 0.04 of its potential returns per unit of risk. Seven West Media is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Seven West Media on December 28, 2024 and sell it today you would earn a total of  1.00  from holding Seven West Media or generate 6.67% return on investment over 90 days.

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

Centaurus Metals  vs.  Seven West Media

Centaurus Metals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Centaurus Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Centaurus Metals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Seven West Media

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Seven West Media are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Seven West unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Centaurus Metals and Seven West

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

The idea behind Centaurus Metals and Seven West Media 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.