Correlation Between CSL and Tamawood
Can any of the company-specific risk be diversified away by investing in both CSL and Tamawood 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 CSL and Tamawood into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CSL and Tamawood, you can compare the effects of market volatilities on CSL and Tamawood 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 CSL with a short position of Tamawood. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSL and Tamawood.
Diversification Opportunities for CSL and Tamawood
Excellent diversification
The 3 months correlation between CSL and Tamawood is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding CSL and Tamawood in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tamawood and CSL 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 CSL are associated (or correlated) with Tamawood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tamawood has no effect on the direction of CSL i.e., CSL and Tamawood go up and down completely randomly.
Pair Corralation between CSL and Tamawood
Assuming the 90 days trading horizon CSL is expected to under-perform the Tamawood. But the stock apears to be less risky and, when comparing its historical volatility, CSL is 2.87 times less risky than Tamawood. The stock trades about -0.01 of its potential returns per unit of risk. The Tamawood is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 235.00 in Tamawood on August 25, 2024 and sell it today you would earn a total of 40.00 from holding Tamawood or generate 17.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CSL vs. Tamawood
Performance |
| Timeline |
| CSL |
| Tamawood |
CSL and Tamawood Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CSL and Tamawood
The main advantage of trading using opposite CSL and Tamawood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSL position performs unexpectedly, Tamawood 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 Tamawood will offset losses from the drop in Tamawood's long position.| CSL vs. REGAL ASIAN INVESTMENTS | CSL vs. Hotel Property Investments | CSL vs. Eagle Mountain Mining | CSL vs. Australian United 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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