Correlation Between Gear4music (Holdings) and Centaur Media

Can any of the company-specific risk be diversified away by investing in both Gear4music (Holdings) and Centaur Media 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 Gear4music (Holdings) and Centaur Media into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gear4music Plc and Centaur Media, you can compare the effects of market volatilities on Gear4music (Holdings) and Centaur Media 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 Gear4music (Holdings) with a short position of Centaur Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gear4music (Holdings) and Centaur Media.

Diversification Opportunities for Gear4music (Holdings) and Centaur Media

-0.86

Correlation Coefficient

Gear4music (Holdings)  Centaur Media

Pay attention - limited upside

The 3 months correlation between Gear4music and Centaur is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Gear4music Plc and Centaur Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centaur Media and Gear4music (Holdings) 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 Gear4music Plc are associated (or correlated) with Centaur Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centaur Media has no effect on the direction of Gear4music (Holdings) i.e., Gear4music (Holdings) and Centaur Media go up and down completely randomly.

Pair Corralation between Gear4music (Holdings) and Centaur Media

Assuming the 90 days trading horizon Gear4music Plc is expected to under-perform the Centaur Media. But the stock apears to be less risky and, when comparing its historical volatility, Gear4music Plc is 2.04 times less risky than Centaur Media. The stock trades about -0.18 of its potential returns per unit of risk. The Centaur Media is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,250  in Centaur Media on November 29, 2024 and sell it today you would earn a total of  450.00  from holding Centaur Media or generate 20.0% return on investment over 90 days.

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

Gear4music Plc  vs.  Centaur Media

Gear4music (Holdings)

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gear4music Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Centaur Media

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Centaur Media are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Centaur Media exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gear4music (Holdings) and Centaur Media

The main advantage of trading using opposite Gear4music (Holdings) and Centaur Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gear4music (Holdings) position performs unexpectedly, Centaur Media 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 Centaur Media will offset losses from the drop in Centaur Media's long position.

The idea behind Gear4music Plc and Centaur Media 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.