Correlation Between CN MODERN and Data#3

Can any of the company-specific risk be diversified away by investing in both CN MODERN and Data#3 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 CN MODERN and Data#3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CN MODERN DAIRY and Data3 Limited, you can compare the effects of market volatilities on CN MODERN and Data#3 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 CN MODERN with a short position of Data#3. Check out your portfolio center. Please also check ongoing floating volatility patterns of CN MODERN and Data#3.

Diversification Opportunities for CN MODERN and Data#3

-0.22

Correlation Coefficient

CN MODERN  Data#3

Very good diversification

The 3 months correlation between 07M and Data#3 is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding CN MODERN DAIRY and Data3 Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Data3 Limited and CN MODERN 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 CN MODERN DAIRY are associated (or correlated) with Data#3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Data3 Limited has no effect on the direction of CN MODERN i.e., CN MODERN and Data#3 go up and down completely randomly.

Pair Corralation between CN MODERN and Data#3

Assuming the 90 days trading horizon CN MODERN DAIRY is expected to generate 1.68 times more return on investment than Data#3. However, CN MODERN is 1.68 times more volatile than Data3 Limited. It trades about 0.21 of its potential returns per unit of risk. Data3 Limited is currently generating about -0.14 per unit of risk. If you would invest  9.65  in CN MODERN DAIRY on September 15, 2024 and sell it today you would earn a total of  1.35  from holding CN MODERN DAIRY or generate 13.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

CN MODERN DAIRY  vs.  Data3 Limited

CN MODERN DAIRY

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CN MODERN DAIRY are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, CN MODERN exhibited solid returns over the last few months and may actually be approaching a breakup point.

Data3 Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Data3 Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Data#3 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CN MODERN and Data#3

The main advantage of trading using opposite CN MODERN and Data#3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CN MODERN position performs unexpectedly, Data#3 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 Data#3 will offset losses from the drop in Data#3's long position.

The idea behind CN MODERN DAIRY and Data3 Limited 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.