Correlation Between Brompton European and Centerra Gold

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

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

Diversification Opportunities for Brompton European and Centerra Gold

0.3

Correlation Coefficient

Brompton European  Centerra Gold

Weak diversification

The 3 months correlation between Brompton and Centerra is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Brompton European Dividend and Centerra Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centerra Gold and Brompton European 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 Brompton European Dividend are associated (or correlated) with Centerra Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centerra Gold has no effect on the direction of Brompton European i.e., Brompton European and Centerra Gold go up and down completely randomly.

Pair Corralation between Brompton European and Centerra Gold

Assuming the 90 days trading horizon Brompton European is expected to generate 1.54 times less return on investment than Centerra Gold. But when comparing it to its historical volatility, Brompton European Dividend is 2.19 times less risky than Centerra Gold. It trades about 0.1 of its potential returns per unit of risk. Centerra Gold is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  802.00  in Centerra Gold on December 24, 2024 and sell it today you would earn a total of  72.00  from holding Centerra Gold or generate 8.98% return on investment over 90 days.

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

Brompton European Dividend  vs.  Centerra Gold

Brompton European

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brompton European Dividend are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Brompton European may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Centerra Gold

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Centerra Gold are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Centerra Gold may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Brompton European and Centerra Gold

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

The idea behind Brompton European Dividend and Centerra Gold 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.