Correlation Between CN MODERN and Cars
Can any of the company-specific risk be diversified away by investing in both CN MODERN and Cars 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 CN MODERN and Cars into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CN MODERN DAIRY and Cars Inc, you can compare the effects of market volatilities on CN MODERN and Cars 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 CN MODERN with a short position of Cars. Check out your portfolio center. Please also check ongoing floating volatility patterns of CN MODERN and Cars.
Diversification Opportunities for CN MODERN and Cars
Significant diversification
The 3 months correlation between 07M and Cars is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding CN MODERN DAIRY and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc and CN MODERN 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 CN MODERN DAIRY are associated (or correlated) with Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of CN MODERN i.e., CN MODERN and Cars go up and down completely randomly.
Pair Corralation between CN MODERN and Cars
Assuming the 90 days trading horizon CN MODERN DAIRY is expected to generate 1.5 times more return on investment than Cars. However, CN MODERN is 1.5 times more volatile than Cars Inc. It trades about 0.09 of its potential returns per unit of risk. Cars Inc is currently generating about -0.01 per unit of risk. If you would invest 7.05 in CN MODERN DAIRY on October 19, 2024 and sell it today you would earn a total of 2.75 from holding CN MODERN DAIRY or generate 39.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CN MODERN DAIRY vs. Cars Inc
Performance |
| Timeline |
| CN MODERN DAIRY |
| Cars Inc |
CN MODERN and Cars Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CN MODERN and Cars
The main advantage of trading using opposite CN MODERN and Cars positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CN MODERN position performs unexpectedly, Cars 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 Cars will offset losses from the drop in Cars' long position.| CN MODERN vs. Addtech AB | CN MODERN vs. SOFI TECHNOLOGIES | CN MODERN vs. NetSol Technologies | CN MODERN vs. THORNEY TECHS LTD |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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