Correlation Between Damsan JSC and CMC Investment
Can any of the company-specific risk be diversified away by investing in both Damsan JSC and CMC Investment 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 Damsan JSC and CMC Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Damsan JSC and CMC Investment JSC, you can compare the effects of market volatilities on Damsan JSC and CMC Investment 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 Damsan JSC with a short position of CMC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Damsan JSC and CMC Investment.
Diversification Opportunities for Damsan JSC and CMC Investment
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Damsan and CMC is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Damsan JSC and CMC Investment JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMC Investment JSC and Damsan JSC 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 Damsan JSC are associated (or correlated) with CMC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMC Investment JSC has no effect on the direction of Damsan JSC i.e., Damsan JSC and CMC Investment go up and down completely randomly.
Pair Corralation between Damsan JSC and CMC Investment
Assuming the 90 days trading horizon Damsan JSC is expected to under-perform the CMC Investment. But the stock apears to be less risky and, when comparing its historical volatility, Damsan JSC is 2.25 times less risky than CMC Investment. The stock trades about -0.12 of its potential returns per unit of risk. The CMC Investment JSC is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 820,000 in CMC Investment JSC on August 29, 2024 and sell it today you would lose (220,000) from holding CMC Investment JSC or give up 26.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 68.5% |
| Values | Daily Returns |
Damsan JSC vs. CMC Investment JSC
Performance |
| Timeline |
| Damsan JSC |
| CMC Investment JSC |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Damsan JSC and CMC Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Damsan JSC and CMC Investment
The main advantage of trading using opposite Damsan JSC and CMC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Damsan JSC position performs unexpectedly, CMC Investment 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 CMC Investment will offset losses from the drop in CMC Investment's long position.| Damsan JSC vs. FIT INVEST JSC | Damsan JSC vs. An Phat Plastic | Damsan JSC vs. Alphanam ME | Damsan JSC vs. APG Securities Joint |
| CMC Investment vs. FIT INVEST JSC | CMC Investment vs. Damsan JSC | CMC Investment vs. An Phat Plastic | CMC Investment vs. Alphanam ME |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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