Correlation Between Davis Select and Centor Energy

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

By analyzing existing cross correlation between Davis Select Equity and Centor Energy, you can compare the effects of market volatilities on Davis Select and Centor Energy 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 Davis Select with a short position of Centor Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis Select and Centor Energy.

Diversification Opportunities for Davis Select and Centor Energy

0.0

Correlation Coefficient

Davis Select  Centor Energy

Pay attention - limited upside

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

Pair Corralation between Davis Select and Centor Energy

Given the investment horizon of 90 days Davis Select is expected to generate 1144.69 times less return on investment than Centor Energy. But when comparing it to its historical volatility, Davis Select Equity is 193.04 times less risky than Centor Energy. It trades about 0.03 of its potential returns per unit of risk. Centor Energy is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Centor Energy on October 26, 2024 and sell it today you would earn a total of  0.00  from holding Centor Energy or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	97.5%
Values	Daily Returns

Davis Select Equity  vs.  Centor Energy

Davis Select Equity

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Select Equity are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Davis Select may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Centor Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centor Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Centor Energy is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Davis Select and Centor Energy

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

The idea behind Davis Select Equity and Centor Energy 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.