Correlation Between Central Reinsurance and Kworld Computer
Can any of the company-specific risk be diversified away by investing in both Central Reinsurance and Kworld Computer 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 Central Reinsurance and Kworld Computer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Central Reinsurance Corp and Kworld Computer Co, you can compare the effects of market volatilities on Central Reinsurance and Kworld Computer 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 Central Reinsurance with a short position of Kworld Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Reinsurance and Kworld Computer.
Diversification Opportunities for Central Reinsurance and Kworld Computer
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Central and Kworld is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Central Reinsurance Corp and Kworld Computer Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kworld Computer and Central Reinsurance 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 Central Reinsurance Corp are associated (or correlated) with Kworld Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kworld Computer has no effect on the direction of Central Reinsurance i.e., Central Reinsurance and Kworld Computer go up and down completely randomly.
Pair Corralation between Central Reinsurance and Kworld Computer
Assuming the 90 days trading horizon Central Reinsurance Corp is expected to generate 0.2 times more return on investment than Kworld Computer. However, Central Reinsurance Corp is 5.03 times less risky than Kworld Computer. It trades about -0.15 of its potential returns per unit of risk. Kworld Computer Co is currently generating about -0.12 per unit of risk. If you would invest 2,585 in Central Reinsurance Corp on October 16, 2024 and sell it today you would lose (40.00) from holding Central Reinsurance Corp or give up 1.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Central Reinsurance Corp vs. Kworld Computer Co
Performance |
| Timeline |
| Central Reinsurance Corp |
| Kworld Computer |
Central Reinsurance and Kworld Computer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Central Reinsurance and Kworld Computer
The main advantage of trading using opposite Central Reinsurance and Kworld Computer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Reinsurance position performs unexpectedly, Kworld Computer 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 Kworld Computer will offset losses from the drop in Kworld Computer's long position.The idea behind Central Reinsurance Corp and Kworld Computer 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.
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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