Correlation Between Centum Electronics and Tree House

Can any of the company-specific risk be diversified away by investing in both Centum Electronics and Tree House 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 Centum Electronics and Tree House into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Centum Electronics Limited and Tree House Education, you can compare the effects of market volatilities on Centum Electronics and Tree House 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 Centum Electronics with a short position of Tree House. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centum Electronics and Tree House.

Diversification Opportunities for Centum Electronics and Tree House

-0.67

Correlation Coefficient

Centum Electronics  Tree House

Excellent diversification

The 3 months correlation between Centum and Tree is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Centum Electronics Limited and Tree House Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tree House Education and Centum Electronics 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 Centum Electronics Limited are associated (or correlated) with Tree House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tree House Education has no effect on the direction of Centum Electronics i.e., Centum Electronics and Tree House go up and down completely randomly.

Pair Corralation between Centum Electronics and Tree House

Assuming the 90 days trading horizon Centum Electronics Limited is expected to generate 1.9 times more return on investment than Tree House. However, Centum Electronics is 1.9 times more volatile than Tree House Education. It trades about 0.15 of its potential returns per unit of risk. Tree House Education is currently generating about -0.17 per unit of risk. If you would invest  165,630  in Centum Electronics Limited on April 24, 2025 and sell it today you would earn a total of  67,280  from holding Centum Electronics Limited or generate 40.62% return on investment over 90 days.

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

Centum Electronics Limited  vs.  Tree House Education

Centum Electronics

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Centum Electronics Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Centum Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Tree House Education

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tree House Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in August 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Centum Electronics and Tree House

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

The idea behind Centum Electronics Limited and Tree House Education 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.