Correlation Between Press Metal and CB Industrial
Can any of the company-specific risk be diversified away by investing in both Press Metal and CB Industrial 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 Press Metal and CB Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Press Metal Bhd and CB Industrial Product, you can compare the effects of market volatilities on Press Metal and CB Industrial 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 Press Metal with a short position of CB Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Press Metal and CB Industrial.
Diversification Opportunities for Press Metal and CB Industrial
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Press and 7076 is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Press Metal Bhd and CB Industrial Product in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CB Industrial Product and Press Metal 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 Press Metal Bhd are associated (or correlated) with CB Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CB Industrial Product has no effect on the direction of Press Metal i.e., Press Metal and CB Industrial go up and down completely randomly.
Pair Corralation between Press Metal and CB Industrial
Assuming the 90 days trading horizon Press Metal Bhd is expected to under-perform the CB Industrial. In addition to that, Press Metal is 1.86 times more volatile than CB Industrial Product. It trades about -0.03 of its total potential returns per unit of risk. CB Industrial Product is currently generating about 0.18 per unit of volatility. If you would invest 128.00 in CB Industrial Product on August 27, 2024 and sell it today you would earn a total of 6.00 from holding CB Industrial Product or generate 4.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Press Metal Bhd vs. CB Industrial Product
Performance |
| Timeline |
| Press Metal Bhd |
| CB Industrial Product |
Press Metal and CB Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Press Metal and CB Industrial
The main advantage of trading using opposite Press Metal and CB Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Press Metal position performs unexpectedly, CB Industrial 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 CB Industrial will offset losses from the drop in CB Industrial's long position.The idea behind Press Metal Bhd and CB Industrial Product 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.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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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