Correlation Between CDL INVESTMENT and East Africa
Can any of the company-specific risk be diversified away by investing in both CDL INVESTMENT and East Africa 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 CDL INVESTMENT and East Africa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CDL INVESTMENT and East Africa Metals, you can compare the effects of market volatilities on CDL INVESTMENT and East Africa 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 CDL INVESTMENT with a short position of East Africa. Check out your portfolio center. Please also check ongoing floating volatility patterns of CDL INVESTMENT and East Africa.
Diversification Opportunities for CDL INVESTMENT and East Africa
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CDL and East is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding CDL INVESTMENT and East Africa Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Africa Metals and CDL INVESTMENT 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 CDL INVESTMENT are associated (or correlated) with East Africa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Africa Metals has no effect on the direction of CDL INVESTMENT i.e., CDL INVESTMENT and East Africa go up and down completely randomly.
Pair Corralation between CDL INVESTMENT and East Africa
Assuming the 90 days trading horizon CDL INVESTMENT is expected to generate 6.49 times less return on investment than East Africa. But when comparing it to its historical volatility, CDL INVESTMENT is 3.82 times less risky than East Africa. It trades about 0.02 of its potential returns per unit of risk. East Africa Metals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 8.40 in East Africa Metals on December 13, 2024 and sell it today you would lose (1.05) from holding East Africa Metals or give up 12.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CDL INVESTMENT vs. East Africa Metals
Performance |
| Timeline |
| CDL INVESTMENT |
| East Africa Metals |
CDL INVESTMENT and East Africa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CDL INVESTMENT and East Africa
The main advantage of trading using opposite CDL INVESTMENT and East Africa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDL INVESTMENT position performs unexpectedly, East Africa 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 East Africa will offset losses from the drop in East Africa's long position.| CDL INVESTMENT vs. Addtech AB | ||
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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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