Correlation Between CPI Aerostructures and Sembcorp Marine
Can any of the company-specific risk be diversified away by investing in both CPI Aerostructures and Sembcorp Marine 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 CPI Aerostructures and Sembcorp Marine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CPI Aerostructures and Sembcorp Marine, you can compare the effects of market volatilities on CPI Aerostructures and Sembcorp Marine 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 CPI Aerostructures with a short position of Sembcorp Marine. Check out your portfolio center. Please also check ongoing floating volatility patterns of CPI Aerostructures and Sembcorp Marine.
Diversification Opportunities for CPI Aerostructures and Sembcorp Marine
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CPI and Sembcorp is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding CPI Aerostructures and Sembcorp Marine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sembcorp Marine and CPI Aerostructures 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 CPI Aerostructures are associated (or correlated) with Sembcorp Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sembcorp Marine has no effect on the direction of CPI Aerostructures i.e., CPI Aerostructures and Sembcorp Marine go up and down completely randomly.
Pair Corralation between CPI Aerostructures and Sembcorp Marine
Considering the 90-day investment horizon CPI Aerostructures is expected to generate 1289.6 times less return on investment than Sembcorp Marine. But when comparing it to its historical volatility, CPI Aerostructures is 88.16 times less risky than Sembcorp Marine. It trades about 0.02 of its potential returns per unit of risk. Sembcorp Marine is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 216.00 in Sembcorp Marine on August 29, 2024 and sell it today you would lose (69.00) from holding Sembcorp Marine or give up 31.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 80.61% |
| Values | Daily Returns |
CPI Aerostructures vs. Sembcorp Marine
Performance |
| Timeline |
| CPI Aerostructures |
| Sembcorp Marine |
CPI Aerostructures and Sembcorp Marine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CPI Aerostructures and Sembcorp Marine
The main advantage of trading using opposite CPI Aerostructures and Sembcorp Marine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CPI Aerostructures position performs unexpectedly, Sembcorp Marine 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 Sembcorp Marine will offset losses from the drop in Sembcorp Marine's long position.| CPI Aerostructures vs. ABIVAX Socit Anonyme | CPI Aerostructures vs. Morningstar Unconstrained Allocation | CPI Aerostructures vs. SPACE | CPI Aerostructures vs. Knife River |
| Sembcorp Marine vs. Austal Limited | Sembcorp Marine vs. Rolls Royce Holdings PLC | Sembcorp Marine vs. AAR Corp | Sembcorp Marine vs. Eve Holding |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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