Correlation Between CMC Investment and Cotec Construction
Can any of the company-specific risk be diversified away by investing in both CMC Investment and Cotec Construction 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 CMC Investment and Cotec Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CMC Investment JSC and Cotec Construction JSC, you can compare the effects of market volatilities on CMC Investment and Cotec Construction 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 CMC Investment with a short position of Cotec Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMC Investment and Cotec Construction.
Diversification Opportunities for CMC Investment and Cotec Construction
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between CMC and Cotec is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding CMC Investment JSC and Cotec Construction JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cotec Construction JSC and CMC 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 CMC Investment JSC are associated (or correlated) with Cotec Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cotec Construction JSC has no effect on the direction of CMC Investment i.e., CMC Investment and Cotec Construction go up and down completely randomly.
Pair Corralation between CMC Investment and Cotec Construction
Assuming the 90 days trading horizon CMC Investment JSC is expected to generate 3.86 times more return on investment than Cotec Construction. However, CMC Investment is 3.86 times more volatile than Cotec Construction JSC. It trades about -0.03 of its potential returns per unit of risk. Cotec Construction JSC is currently generating about -0.12 per unit of risk. If you would invest 670,000 in CMC Investment JSC on September 13, 2024 and sell it today you would lose (20,000) from holding CMC Investment JSC or give up 2.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 40.91% |
| Values | Daily Returns |
CMC Investment JSC vs. Cotec Construction JSC
Performance |
| Timeline |
| CMC Investment JSC |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
| Cotec Construction JSC |
CMC Investment and Cotec Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CMC Investment and Cotec Construction
The main advantage of trading using opposite CMC Investment and Cotec Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMC Investment position performs unexpectedly, Cotec Construction 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 Cotec Construction will offset losses from the drop in Cotec Construction's long position.| CMC Investment vs. FIT INVEST JSC | CMC Investment vs. Damsan JSC | CMC Investment vs. An Phat Plastic | CMC Investment vs. Alphanam ME |
| Cotec Construction vs. FIT INVEST JSC | Cotec Construction vs. Damsan JSC | Cotec Construction vs. An Phat Plastic | Cotec Construction 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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