Correlation Between Indutrade and Centrica PLC
Can any of the company-specific risk be diversified away by investing in both Indutrade and Centrica PLC 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 Indutrade and Centrica PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indutrade AB and Centrica PLC, you can compare the effects of market volatilities on Indutrade and Centrica PLC 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 Indutrade with a short position of Centrica PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indutrade and Centrica PLC.
Diversification Opportunities for Indutrade and Centrica PLC
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Indutrade and Centrica is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Indutrade AB and Centrica PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrica PLC and Indutrade 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 Indutrade AB are associated (or correlated) with Centrica PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrica PLC has no effect on the direction of Indutrade i.e., Indutrade and Centrica PLC go up and down completely randomly.
Pair Corralation between Indutrade and Centrica PLC
Assuming the 90 days trading horizon Indutrade is expected to generate 11.03 times less return on investment than Centrica PLC. In addition to that, Indutrade is 1.05 times more volatile than Centrica PLC. It trades about 0.03 of its total potential returns per unit of risk. Centrica PLC is currently generating about 0.37 per unit of volatility. If you would invest 11,850 in Centrica PLC on September 14, 2024 and sell it today you would earn a total of 1,310 from holding Centrica PLC or generate 11.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Indutrade AB vs. Centrica PLC
Performance |
| Timeline |
| Indutrade AB |
| Centrica PLC |
Indutrade and Centrica PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indutrade and Centrica PLC
The main advantage of trading using opposite Indutrade and Centrica PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indutrade position performs unexpectedly, Centrica PLC 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 Centrica PLC will offset losses from the drop in Centrica PLC's long position.| Indutrade vs. Central Asia Metals | Indutrade vs. Summit Materials Cl | Indutrade vs. Empire Metals Limited | Indutrade vs. Waste Management |
| Centrica PLC vs. Samsung Electronics Co | Centrica PLC vs. Samsung Electronics Co | Centrica PLC vs. Hyundai Motor | Centrica PLC vs. Toyota Motor Corp |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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