Correlation Between Century Petroleum and Small Cap

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Can any of the company-specific risk be diversified away by investing in both Century Petroleum and Small Cap 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 Petroleum and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Century Petroleum Corp and Small Cap Core, you can compare the effects of market volatilities on Century Petroleum and Small Cap 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 Petroleum with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Petroleum and Small Cap.

Diversification Opportunities for Century Petroleum and Small Cap

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Century and Small is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Century Petroleum Corp and Small Cap Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Core and Century Petroleum 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 Petroleum Corp are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Core has no effect on the direction of Century Petroleum i.e., Century Petroleum and Small Cap go up and down completely randomly.

Pair Corralation between Century Petroleum and Small Cap

Given the investment horizon of 90 days Century Petroleum Corp is expected to generate 33.61 times more return on investment than Small Cap. However, Century Petroleum is 33.61 times more volatile than Small Cap Core. It trades about 0.04 of its potential returns per unit of risk. Small Cap Core is currently generating about 0.02 per unit of risk. If you would invest  0.01  in Century Petroleum Corp on October 5, 2024 and sell it today you would lose (0.01) from holding Century Petroleum Corp or give up 90.0% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Century Petroleum Corp  vs.  Small Cap Core

 Performance 
       Timeline  
Century Petroleum Corp 

Risk-Adjusted Performance

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Over the last 90 days Century Petroleum Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Century Petroleum is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.
Small Cap Core 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Small Cap Core has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Century Petroleum and Small Cap Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Century Petroleum and Small Cap

The main advantage of trading using opposite Century Petroleum and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Petroleum position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.
The idea behind Century Petroleum Corp and Small Cap Core 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.
Check out your portfolio center.
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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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