Correlation Between CMT and Hivemapper
Can any of the company-specific risk be diversified away by investing in both CMT and Hivemapper 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 CMT and Hivemapper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CMT and Hivemapper, you can compare the effects of market volatilities on CMT and Hivemapper 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 CMT with a short position of Hivemapper. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMT and Hivemapper.
Diversification Opportunities for CMT and Hivemapper
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between CMT and Hivemapper is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding CMT and Hivemapper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hivemapper and CMT 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 CMT are associated (or correlated) with Hivemapper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hivemapper has no effect on the direction of CMT i.e., CMT and Hivemapper go up and down completely randomly.
Pair Corralation between CMT and Hivemapper
Assuming the 90 days trading horizon CMT is expected to generate 0.51 times more return on investment than Hivemapper. However, CMT is 1.97 times less risky than Hivemapper. It trades about 0.43 of its potential returns per unit of risk. Hivemapper is currently generating about 0.16 per unit of risk. If you would invest 0.53 in CMT on August 25, 2024 and sell it today you would earn a total of 0.25 from holding CMT or generate 46.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CMT vs. Hivemapper
Performance |
| Timeline |
| CMT |
| Hivemapper |
CMT and Hivemapper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CMT and Hivemapper
The main advantage of trading using opposite CMT and Hivemapper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMT position performs unexpectedly, Hivemapper 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 Hivemapper will offset losses from the drop in Hivemapper's long position.The idea behind CMT and Hivemapper 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.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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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