Correlation Between Crescent Star and Big Bird
Can any of the company-specific risk be diversified away by investing in both Crescent Star and Big Bird 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 Crescent Star and Big Bird into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Crescent Star Insurance and Big Bird Foods, you can compare the effects of market volatilities on Crescent Star and Big Bird 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 Crescent Star with a short position of Big Bird. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crescent Star and Big Bird.
Diversification Opportunities for Crescent Star and Big Bird
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Crescent and Big is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Crescent Star Insurance and Big Bird Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Bird Foods and Crescent Star 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 Crescent Star Insurance are associated (or correlated) with Big Bird. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Bird Foods has no effect on the direction of Crescent Star i.e., Crescent Star and Big Bird go up and down completely randomly.
Pair Corralation between Crescent Star and Big Bird
Assuming the 90 days trading horizon Crescent Star Insurance is expected to generate 1.1 times more return on investment than Big Bird. However, Crescent Star is 1.1 times more volatile than Big Bird Foods. It trades about 0.07 of its potential returns per unit of risk. Big Bird Foods is currently generating about 0.05 per unit of risk. If you would invest 140.00 in Crescent Star Insurance on August 31, 2024 and sell it today you would earn a total of 171.00 from holding Crescent Star Insurance or generate 122.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 22.87% |
| Values | Daily Returns |
Crescent Star Insurance vs. Big Bird Foods
Performance |
| Timeline |
| Crescent Star Insurance |
| Big Bird Foods |
Crescent Star and Big Bird Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Crescent Star and Big Bird
The main advantage of trading using opposite Crescent Star and Big Bird positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crescent Star position performs unexpectedly, Big Bird 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 Big Bird will offset losses from the drop in Big Bird's long position.| Crescent Star vs. Air Link Communication | Crescent Star vs. Century Insurance | Crescent Star vs. Atlas Insurance | Crescent Star vs. Security Investment Bank |
| Big Bird vs. Orient Rental Modaraba | Big Bird vs. Pakistan Hotel Developers | Big Bird vs. Pakistan Aluminium Beverage | Big Bird vs. Air Link Communication |
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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