Correlation Between Nafoods Group and CMC Investment
Can any of the company-specific risk be diversified away by investing in both Nafoods Group and CMC Investment 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 Nafoods Group and CMC Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nafoods Group JSC and CMC Investment JSC, you can compare the effects of market volatilities on Nafoods Group and CMC Investment 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 Nafoods Group with a short position of CMC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nafoods Group and CMC Investment.
Diversification Opportunities for Nafoods Group and CMC Investment
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nafoods and CMC is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Nafoods Group JSC and CMC Investment JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMC Investment JSC and Nafoods Group 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 Nafoods Group JSC are associated (or correlated) with CMC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMC Investment JSC has no effect on the direction of Nafoods Group i.e., Nafoods Group and CMC Investment go up and down completely randomly.
Pair Corralation between Nafoods Group and CMC Investment
Assuming the 90 days trading horizon Nafoods Group is expected to generate 1.14 times less return on investment than CMC Investment. But when comparing it to its historical volatility, Nafoods Group JSC is 2.46 times less risky than CMC Investment. It trades about 0.08 of its potential returns per unit of risk. CMC Investment JSC is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 560,000 in CMC Investment JSC on August 29, 2024 and sell it today you would earn a total of 40,000 from holding CMC Investment JSC or generate 7.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 66.67% |
| Values | Daily Returns |
Nafoods Group JSC vs. CMC Investment JSC
Performance |
| Timeline |
| Nafoods Group JSC |
| CMC Investment JSC |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Nafoods Group and CMC Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nafoods Group and CMC Investment
The main advantage of trading using opposite Nafoods Group and CMC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nafoods Group position performs unexpectedly, CMC Investment 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 CMC Investment will offset losses from the drop in CMC Investment's long position.| Nafoods Group vs. FIT INVEST JSC | Nafoods Group vs. Damsan JSC | Nafoods Group vs. An Phat Plastic | Nafoods Group vs. Alphanam ME |
| CMC Investment vs. FIT INVEST JSC | CMC Investment vs. Damsan JSC | CMC Investment vs. An Phat Plastic | CMC Investment 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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