Correlation Between Century Wind and Newretail
Can any of the company-specific risk be diversified away by investing in both Century Wind and Newretail 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 Century Wind and Newretail into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Century Wind Power and Newretail Co, you can compare the effects of market volatilities on Century Wind and Newretail 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 Century Wind with a short position of Newretail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Wind and Newretail.
Diversification Opportunities for Century Wind and Newretail
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Century and Newretail is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Century Wind Power and Newretail Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newretail and Century Wind 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 Century Wind Power are associated (or correlated) with Newretail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newretail has no effect on the direction of Century Wind i.e., Century Wind and Newretail go up and down completely randomly.
Pair Corralation between Century Wind and Newretail
Assuming the 90 days trading horizon Century Wind Power is expected to under-perform the Newretail. But the stock apears to be less risky and, when comparing its historical volatility, Century Wind Power is 1.7 times less risky than Newretail. The stock trades about -0.11 of its potential returns per unit of risk. The Newretail Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,450 in Newretail Co on November 4, 2024 and sell it today you would earn a total of 870.00 from holding Newretail Co or generate 60.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Century Wind Power vs. Newretail Co
Performance |
| Timeline |
| Century Wind Power |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Newretail |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
Century Wind and Newretail Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Century Wind and Newretail
The main advantage of trading using opposite Century Wind and Newretail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Wind position performs unexpectedly, Newretail 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 Newretail will offset losses from the drop in Newretail's long position.The idea behind Century Wind Power and Newretail Co 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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