Correlation Between CB Industrial and ES Ceramics
Can any of the company-specific risk be diversified away by investing in both CB Industrial and ES Ceramics 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 CB Industrial and ES Ceramics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CB Industrial Product and ES Ceramics Technology, you can compare the effects of market volatilities on CB Industrial and ES Ceramics 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 CB Industrial with a short position of ES Ceramics. Check out your portfolio center. Please also check ongoing floating volatility patterns of CB Industrial and ES Ceramics.
Diversification Opportunities for CB Industrial and ES Ceramics
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between 7076 and 0100 is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding CB Industrial Product and ES Ceramics Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ES Ceramics Technology and CB Industrial 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 CB Industrial Product are associated (or correlated) with ES Ceramics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ES Ceramics Technology has no effect on the direction of CB Industrial i.e., CB Industrial and ES Ceramics go up and down completely randomly.
Pair Corralation between CB Industrial and ES Ceramics
Assuming the 90 days trading horizon CB Industrial Product is expected to under-perform the ES Ceramics. But the stock apears to be less risky and, when comparing its historical volatility, CB Industrial Product is 2.7 times less risky than ES Ceramics. The stock trades about -0.2 of its potential returns per unit of risk. The ES Ceramics Technology is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 16.00 in ES Ceramics Technology on October 23, 2024 and sell it today you would lose (1.00) from holding ES Ceramics Technology or give up 6.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
CB Industrial Product vs. ES Ceramics Technology
Performance |
| Timeline |
| CB Industrial Product |
| ES Ceramics Technology |
CB Industrial and ES Ceramics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CB Industrial and ES Ceramics
The main advantage of trading using opposite CB Industrial and ES Ceramics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CB Industrial position performs unexpectedly, ES Ceramics 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 ES Ceramics will offset losses from the drop in ES Ceramics' long position.| CB Industrial vs. Star Media Group | CB Industrial vs. Silver Ridge Holdings | CB Industrial vs. Systech Bhd | CB Industrial vs. Cloudpoint Technology Berhad |
| ES Ceramics vs. YX Precious Metals | ES Ceramics vs. Melewar Industrial Group | ES Ceramics vs. Mercury Industries Bhd | ES Ceramics vs. Star Media 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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