Correlation Between Amata Summit and CPN Retail

Can any of the company-specific risk be diversified away by investing in both Amata Summit and CPN Retail 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 Amata Summit and CPN Retail into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Amata Summit Growth and CPN Retail Growth, you can compare the effects of market volatilities on Amata Summit and CPN Retail 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 Amata Summit with a short position of CPN Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amata Summit and CPN Retail.

Diversification Opportunities for Amata Summit and CPN Retail

0.46

Correlation Coefficient

Amata Summit  CPN Retail

Very weak diversification

The 3 months correlation between Amata and CPN is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Amata Summit Growth and CPN Retail Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPN Retail Growth and Amata Summit 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 Amata Summit Growth are associated (or correlated) with CPN Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPN Retail Growth has no effect on the direction of Amata Summit i.e., Amata Summit and CPN Retail go up and down completely randomly.

Pair Corralation between Amata Summit and CPN Retail

Assuming the 90 days trading horizon Amata Summit is expected to generate 1.08 times less return on investment than CPN Retail. But when comparing it to its historical volatility, Amata Summit Growth is 1.79 times less risky than CPN Retail. It trades about 0.14 of its potential returns per unit of risk. CPN Retail Growth is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,119  in CPN Retail Growth on September 3, 2024 and sell it today you would earn a total of  101.00  from holding CPN Retail Growth or generate 9.03% return on investment over 90 days.

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

Amata Summit Growth  vs.  CPN Retail Growth

Amata Summit Growth

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amata Summit Growth are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Amata Summit may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CPN Retail Growth

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CPN Retail Growth are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, CPN Retail may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Amata Summit and CPN Retail

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

The idea behind Amata Summit Growth and CPN Retail Growth 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.

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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.