Correlation Between Centerra Gold and European Residential

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Can any of the company-specific risk be diversified away by investing in both Centerra Gold and European Residential 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 Centerra Gold and European Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Centerra Gold and European Residential Real, you can compare the effects of market volatilities on Centerra Gold and European Residential 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 Centerra Gold with a short position of European Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centerra Gold and European Residential.

Diversification Opportunities for Centerra Gold and European Residential

-0.85
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Centerra and European is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Centerra Gold and European Residential Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Residential Real and Centerra Gold 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 Centerra Gold are associated (or correlated) with European Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Residential Real has no effect on the direction of Centerra Gold i.e., Centerra Gold and European Residential go up and down completely randomly.

Pair Corralation between Centerra Gold and European Residential

Assuming the 90 days horizon Centerra Gold is expected to under-perform the European Residential. But the stock apears to be less risky and, when comparing its historical volatility, Centerra Gold is 1.03 times less risky than European Residential. The stock trades about -0.06 of its potential returns per unit of risk. The European Residential Real is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  360.00  in European Residential Real on September 26, 2024 and sell it today you would earn a total of  24.00  from holding European Residential Real or generate 6.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Centerra Gold  vs.  European Residential Real

 Performance 
       Timeline  
Centerra Gold 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Centerra Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.
European Residential Real 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in European Residential Real are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, European Residential sustained solid returns over the last few months and may actually be approaching a breakup point.

Centerra Gold and European Residential Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Centerra Gold and European Residential

The main advantage of trading using opposite Centerra Gold and European Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centerra Gold position performs unexpectedly, European Residential 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 European Residential will offset losses from the drop in European Residential's long position.
The idea behind Centerra Gold and European Residential Real 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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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.

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