Correlation Between Dividend Income and Central Securities

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

By analyzing existing cross correlation between Dividend Income and Central Securities, you can compare the effects of market volatilities on Dividend Income and Central Securities 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 Dividend Income with a short position of Central Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dividend Income and Central Securities.

Diversification Opportunities for Dividend Income and Central Securities

0.0

Correlation Coefficient

Dividend Income  Central Securities

Pay attention - limited upside

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

Pair Corralation between Dividend Income and Central Securities

If you would invest  4,706  in Central Securities on November 19, 2024 and sell it today you would earn a total of  94.00  from holding Central Securities or generate 2.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Dividend Income  vs.  Central Securities

Dividend Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dividend Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Dividend Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Central Securities

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Central Securities are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Central Securities is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Dividend Income and Central Securities

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

The idea behind Dividend Income and Central Securities 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.