Correlation Between Cabot and 5E Advanced

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Can any of the company-specific risk be diversified away by investing in both Cabot and 5E Advanced 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 Cabot and 5E Advanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cabot and 5E Advanced Materials, you can compare the effects of market volatilities on Cabot and 5E Advanced 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 Cabot with a short position of 5E Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cabot and 5E Advanced.

Diversification Opportunities for Cabot and 5E Advanced

-0.42
  Correlation Coefficient

Very good diversification

The 3 months correlation between Cabot and FEAM is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Cabot and 5E Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 5E Advanced Materials and Cabot 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 Cabot are associated (or correlated) with 5E Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 5E Advanced Materials has no effect on the direction of Cabot i.e., Cabot and 5E Advanced go up and down completely randomly.

Pair Corralation between Cabot and 5E Advanced

Considering the 90-day investment horizon Cabot is expected to generate 0.39 times more return on investment than 5E Advanced. However, Cabot is 2.6 times less risky than 5E Advanced. It trades about 0.04 of its potential returns per unit of risk. 5E Advanced Materials is currently generating about -0.15 per unit of risk. If you would invest  10,003  in Cabot on August 24, 2024 and sell it today you would earn a total of  864.00  from holding Cabot or generate 8.64% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Cabot  vs.  5E Advanced Materials

 Performance 
       Timeline  
Cabot 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Cabot are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, Cabot is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.
5E Advanced Materials 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days 5E Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Cabot and 5E Advanced Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cabot and 5E Advanced

The main advantage of trading using opposite Cabot and 5E Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cabot position performs unexpectedly, 5E Advanced 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 5E Advanced will offset losses from the drop in 5E Advanced's long position.
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The idea behind Cabot and 5E Advanced Materials 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.
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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