Correlation Between Central Reinsurance and U Media
Can any of the company-specific risk be diversified away by investing in both Central Reinsurance and U 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 Central Reinsurance and U Media 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 U Media Communications, you can compare the effects of market volatilities on Central Reinsurance and U 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 Central Reinsurance with a short position of U Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Reinsurance and U Media.
Diversification Opportunities for Central Reinsurance and U Media
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Central and 6470 is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Central Reinsurance Corp and U Media Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on U Media Communications 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 U Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of U Media Communications has no effect on the direction of Central Reinsurance i.e., Central Reinsurance and U Media go up and down completely randomly.
Pair Corralation between Central Reinsurance and U Media
Assuming the 90 days trading horizon Central Reinsurance Corp is expected to under-perform the U Media. But the stock apears to be less risky and, when comparing its historical volatility, Central Reinsurance Corp is 2.04 times less risky than U Media. The stock trades about -0.13 of its potential returns per unit of risk. The U Media Communications is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 5,110 in U Media Communications on August 29, 2024 and sell it today you would earn a total of 20.00 from holding U Media Communications or generate 0.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Central Reinsurance Corp vs. U Media Communications
Performance |
| Timeline |
| Central Reinsurance Corp |
| U Media Communications |
Central Reinsurance and U Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Central Reinsurance and U Media
The main advantage of trading using opposite Central Reinsurance and U Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Reinsurance position performs unexpectedly, U 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 U Media will offset losses from the drop in U Media's long position.| Central Reinsurance vs. Hi Lai Foods Co | Central Reinsurance vs. Loop Telecommunication International | Central Reinsurance vs. China Mobile | Central Reinsurance vs. Hunya Foods Co |
| U Media vs. Mechema Chemicals Int | U Media vs. Grand Pacific Petrochemical | U Media vs. Taita Chemical Co | U Media vs. Phoenix Silicon International |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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