Correlation Between Century Pacific and Basic Energy
Can any of the company-specific risk be diversified away by investing in both Century Pacific and Basic Energy 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 Pacific and Basic Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Century Pacific Food and Basic Energy Corp, you can compare the effects of market volatilities on Century Pacific and Basic Energy 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 Pacific with a short position of Basic Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Pacific and Basic Energy.
Diversification Opportunities for Century Pacific and Basic Energy
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Century and Basic is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Century Pacific Food and Basic Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Energy Corp and Century Pacific 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 Pacific Food are associated (or correlated) with Basic Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Energy Corp has no effect on the direction of Century Pacific i.e., Century Pacific and Basic Energy go up and down completely randomly.
Pair Corralation between Century Pacific and Basic Energy
Assuming the 90 days trading horizon Century Pacific Food is expected to generate 0.37 times more return on investment than Basic Energy. However, Century Pacific Food is 2.69 times less risky than Basic Energy. It trades about 0.18 of its potential returns per unit of risk. Basic Energy Corp is currently generating about 0.02 per unit of risk. If you would invest 4,080 in Century Pacific Food on September 13, 2024 and sell it today you would earn a total of 205.00 from holding Century Pacific Food or generate 5.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Century Pacific Food vs. Basic Energy Corp
Performance |
| Timeline |
| Century Pacific Food |
| Basic Energy Corp |
Century Pacific and Basic Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Century Pacific and Basic Energy
The main advantage of trading using opposite Century Pacific and Basic Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Pacific position performs unexpectedly, Basic Energy 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 Basic Energy will offset losses from the drop in Basic Energy's long position.| Century Pacific vs. Megawide Construction Corp | Century Pacific vs. Apex Mining Co | Century Pacific vs. Union Bank of | Century Pacific vs. East West Banking |
| Basic Energy vs. Transpacific Broadband Group | Basic Energy vs. Century Pacific Food | Basic Energy vs. Apex Mining Co | Basic Energy vs. Top Frontier 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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