Correlation Between Centrica Plc and Maxim Power
Can any of the company-specific risk be diversified away by investing in both Centrica Plc and Maxim Power 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 Centrica Plc and Maxim Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Centrica plc and Maxim Power Corp, you can compare the effects of market volatilities on Centrica Plc and Maxim Power 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 Centrica Plc with a short position of Maxim Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centrica Plc and Maxim Power.
Diversification Opportunities for Centrica Plc and Maxim Power
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Centrica and Maxim is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Centrica plc and Maxim Power Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maxim Power Corp and Centrica Plc 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 Centrica plc are associated (or correlated) with Maxim Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maxim Power Corp has no effect on the direction of Centrica Plc i.e., Centrica Plc and Maxim Power go up and down completely randomly.
Pair Corralation between Centrica Plc and Maxim Power
Assuming the 90 days horizon Centrica plc is expected to generate 2.04 times more return on investment than Maxim Power. However, Centrica Plc is 2.04 times more volatile than Maxim Power Corp. It trades about 0.03 of its potential returns per unit of risk. Maxim Power Corp is currently generating about 0.02 per unit of risk. If you would invest 141.00 in Centrica plc on September 1, 2024 and sell it today you would earn a total of 13.00 from holding Centrica plc or generate 9.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 59.41% |
| Values | Daily Returns |
Centrica plc vs. Maxim Power Corp
Performance |
| Timeline |
| Centrica plc |
| Maxim Power Corp |
Centrica Plc and Maxim Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Centrica Plc and Maxim Power
The main advantage of trading using opposite Centrica Plc and Maxim Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centrica Plc position performs unexpectedly, Maxim Power 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 Maxim Power will offset losses from the drop in Maxim Power's long position.| Centrica Plc vs. Vistra Energy Corp | Centrica Plc vs. Centrica PLC ADR | Centrica Plc vs. Fibra UNO | Centrica Plc vs. Lloyds Banking Group |
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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