Correlation Between Centre American and M Large
Can any of the company-specific risk be diversified away by investing in both Centre American and M Large 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 Centre American and M Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Centre American Select and M Large Cap, you can compare the effects of market volatilities on Centre American and M Large 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 Centre American with a short position of M Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centre American and M Large.
Diversification Opportunities for Centre American and M Large
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Centre and MTCGX is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Centre American Select and M Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M Large Cap and Centre American 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 Centre American Select are associated (or correlated) with M Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M Large Cap has no effect on the direction of Centre American i.e., Centre American and M Large go up and down completely randomly.
Pair Corralation between Centre American and M Large
Assuming the 90 days horizon Centre American is expected to generate 2.71 times less return on investment than M Large. But when comparing it to its historical volatility, Centre American Select is 1.56 times less risky than M Large. It trades about 0.03 of its potential returns per unit of risk. M Large Cap is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,533 in M Large Cap on October 25, 2024 and sell it today you would earn a total of 984.00 from holding M Large Cap or generate 38.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Centre American Select vs. M Large Cap
Performance |
| Timeline |
| Centre American Select |
| M Large Cap |
Centre American and M Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Centre American and M Large
The main advantage of trading using opposite Centre American and M Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centre American position performs unexpectedly, M Large 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 M Large will offset losses from the drop in M Large's long position.| Centre American vs. Allianzgi Diversified Income | Centre American vs. Wilmington Diversified Income | Centre American vs. Davenport Small Cap | Centre American vs. Delaware Limited Term Diversified |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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