Correlation Between FEC Resources and Centaurus Energy

Can any of the company-specific risk be diversified away by investing in both FEC Resources and Centaurus 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 FEC Resources and Centaurus Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FEC Resources and Centaurus Energy, you can compare the effects of market volatilities on FEC Resources and Centaurus 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 FEC Resources with a short position of Centaurus Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of FEC Resources and Centaurus Energy.

Diversification Opportunities for FEC Resources and Centaurus Energy

-0.38

Correlation Coefficient

FEC Resources  Centaurus Energy

Very good diversification

The 3 months correlation between FEC and Centaurus is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding FEC Resources and Centaurus Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centaurus Energy and FEC Resources 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 FEC Resources are associated (or correlated) with Centaurus Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centaurus Energy has no effect on the direction of FEC Resources i.e., FEC Resources and Centaurus Energy go up and down completely randomly.

Pair Corralation between FEC Resources and Centaurus Energy

Assuming the 90 days horizon FEC Resources is expected to generate 22.92 times more return on investment than Centaurus Energy. However, FEC Resources is 22.92 times more volatile than Centaurus Energy. It trades about 0.14 of its potential returns per unit of risk. Centaurus Energy is currently generating about 0.12 per unit of risk. If you would invest  0.16  in FEC Resources on May 11, 2025 and sell it today you would lose (0.07) from holding FEC Resources or give up 43.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

FEC Resources  vs.  Centaurus Energy

FEC Resources

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FEC Resources are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, FEC Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Centaurus Energy

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Centaurus Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Centaurus Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FEC Resources and Centaurus Energy

The main advantage of trading using opposite FEC Resources and Centaurus Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FEC Resources position performs unexpectedly, Centaurus 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 Centaurus Energy will offset losses from the drop in Centaurus Energy's long position.

The idea behind FEC Resources and Centaurus Energy 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.