Correlation Between ABC BANKING and CIM FINANCIAL
Can any of the company-specific risk be diversified away by investing in both ABC BANKING and CIM FINANCIAL 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 ABC BANKING and CIM FINANCIAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABC BANKING PORATION and CIM FINANCIAL SERVICES, you can compare the effects of market volatilities on ABC BANKING and CIM FINANCIAL 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 ABC BANKING with a short position of CIM FINANCIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABC BANKING and CIM FINANCIAL.
Diversification Opportunities for ABC BANKING and CIM FINANCIAL
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ABC and CIM is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding ABC BANKING PORATION and CIM FINANCIAL SERVICES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIM FINANCIAL SERVICES and ABC BANKING 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 ABC BANKING PORATION are associated (or correlated) with CIM FINANCIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIM FINANCIAL SERVICES has no effect on the direction of ABC BANKING i.e., ABC BANKING and CIM FINANCIAL go up and down completely randomly.
Pair Corralation between ABC BANKING and CIM FINANCIAL
Assuming the 90 days trading horizon ABC BANKING PORATION is expected to generate 0.56 times more return on investment than CIM FINANCIAL. However, ABC BANKING PORATION is 1.77 times less risky than CIM FINANCIAL. It trades about -0.41 of its potential returns per unit of risk. CIM FINANCIAL SERVICES is currently generating about -0.36 per unit of risk. If you would invest 2,095 in ABC BANKING PORATION on August 27, 2024 and sell it today you would lose (95.00) from holding ABC BANKING PORATION or give up 4.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ABC BANKING PORATION vs. CIM FINANCIAL SERVICES
Performance |
| Timeline |
| ABC BANKING PORATION |
| CIM FINANCIAL SERVICES |
ABC BANKING and CIM FINANCIAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABC BANKING and CIM FINANCIAL
The main advantage of trading using opposite ABC BANKING and CIM FINANCIAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABC BANKING position performs unexpectedly, CIM FINANCIAL 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 CIM FINANCIAL will offset losses from the drop in CIM FINANCIAL's long position.| ABC BANKING vs. MCB GROUP LTD | ABC BANKING vs. LOTTOTECH LTD | ABC BANKING vs. NEW MAURITIUS HOTELS | ABC BANKING vs. MIWA SUGAR LIMITED |
| CIM FINANCIAL vs. MCB GROUP LTD | CIM FINANCIAL vs. LOTTOTECH LTD | CIM FINANCIAL vs. NEW MAURITIUS HOTELS | CIM FINANCIAL vs. MIWA SUGAR LIMITED |
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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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