Correlation Between Central Reinsurance and Allied Circuit
Can any of the company-specific risk be diversified away by investing in both Central Reinsurance and Allied Circuit 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 Allied Circuit 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 Allied Circuit Co, you can compare the effects of market volatilities on Central Reinsurance and Allied Circuit 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 Allied Circuit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Reinsurance and Allied Circuit.
Diversification Opportunities for Central Reinsurance and Allied Circuit
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Central and Allied is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Central Reinsurance Corp and Allied Circuit Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Circuit 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 Allied Circuit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Circuit has no effect on the direction of Central Reinsurance i.e., Central Reinsurance and Allied Circuit go up and down completely randomly.
Pair Corralation between Central Reinsurance and Allied Circuit
Assuming the 90 days trading horizon Central Reinsurance Corp is expected to generate 0.48 times more return on investment than Allied Circuit. However, Central Reinsurance Corp is 2.1 times less risky than Allied Circuit. It trades about 0.11 of its potential returns per unit of risk. Allied Circuit Co is currently generating about -0.05 per unit of risk. If you would invest 2,530 in Central Reinsurance Corp on September 15, 2024 and sell it today you would earn a total of 55.00 from holding Central Reinsurance Corp or generate 2.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Central Reinsurance Corp vs. Allied Circuit Co
Performance |
| Timeline |
| Central Reinsurance Corp |
| Allied Circuit |
Central Reinsurance and Allied Circuit Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Central Reinsurance and Allied Circuit
The main advantage of trading using opposite Central Reinsurance and Allied Circuit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Reinsurance position performs unexpectedly, Allied Circuit 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 Allied Circuit will offset losses from the drop in Allied Circuit's long position.| Central Reinsurance vs. Huaku Development Co | Central Reinsurance vs. Fubon Financial Holding | Central Reinsurance vs. Chailease Holding Co | Central Reinsurance vs. CTBC Financial Holding |
| Allied Circuit vs. Central Reinsurance Corp | Allied Circuit vs. Sports Gear Co | Allied Circuit vs. Sunspring Metal Corp | Allied Circuit vs. Chinese Maritime Transport |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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