Correlation Between Centaurus Metals and Xero

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

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

Diversification Opportunities for Centaurus Metals and Xero

-0.41

Correlation Coefficient

Centaurus Metals  Xero

Very good diversification

The 3 months correlation between Centaurus and Xero is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Centaurus Metals and Xero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xero 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 Xero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xero has no effect on the direction of Centaurus Metals i.e., Centaurus Metals and Xero go up and down completely randomly.

Pair Corralation between Centaurus Metals and Xero

Assuming the 90 days trading horizon Centaurus Metals is expected to generate 5.07 times less return on investment than Xero. In addition to that, Centaurus Metals is 2.91 times more volatile than Xero. It trades about 0.01 of its total potential returns per unit of risk. Xero is currently generating about 0.18 per unit of volatility. If you would invest  14,427  in Xero on September 12, 2024 and sell it today you would earn a total of  2,672  from holding Xero or generate 18.52% return on investment over 90 days.

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

Centaurus Metals  vs.  Xero

Centaurus Metals

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Centaurus Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Centaurus Metals is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Xero

Risk-Adjusted Performance

14 of 100

Solid

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

Pair Trading with Centaurus Metals and Xero

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

The idea behind Centaurus Metals and Xero 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..