Correlation Between Rural Funds and Scentre

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

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

Diversification Opportunities for Rural Funds and Scentre

0.4

Correlation Coefficient

Rural Funds  Scentre

Very weak diversification

The 3 months correlation between Rural and Scentre is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Rural Funds Group and Scentre Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scentre Group and Rural Funds 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 Rural Funds Group are associated (or correlated) with Scentre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scentre Group has no effect on the direction of Rural Funds i.e., Rural Funds and Scentre go up and down completely randomly.

Pair Corralation between Rural Funds and Scentre

Assuming the 90 days trading horizon Rural Funds Group is expected to under-perform the Scentre. But the stock apears to be less risky and, when comparing its historical volatility, Rural Funds Group is 1.02 times less risky than Scentre. The stock trades about -0.03 of its potential returns per unit of risk. The Scentre Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  271.00  in Scentre Group on October 10, 2024 and sell it today you would earn a total of  84.00  from holding Scentre Group or generate 31.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Rural Funds Group  vs.  Scentre Group

Rural Funds Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rural Funds Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Scentre Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scentre Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Scentre is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Rural Funds and Scentre

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

The idea behind Rural Funds Group and Scentre Group 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.