Correlation Between Basic Fit and CM NV

Can any of the company-specific risk be diversified away by investing in both Basic Fit and CM NV 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 Basic Fit and CM NV into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Basic Fit NV and CM NV, you can compare the effects of market volatilities on Basic Fit and CM NV 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 Basic Fit with a short position of CM NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Fit and CM NV.

Diversification Opportunities for Basic Fit and CM NV

0.76

Correlation Coefficient

Basic Fit  CM NV

Poor diversification

The 3 months correlation between Basic and CMCOM is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Basic Fit NV and CM NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CM NV and Basic Fit 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 Basic Fit NV are associated (or correlated) with CM NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CM NV has no effect on the direction of Basic Fit i.e., Basic Fit and CM NV go up and down completely randomly.

Pair Corralation between Basic Fit and CM NV

Assuming the 90 days trading horizon Basic Fit NV is expected to generate 0.93 times more return on investment than CM NV. However, Basic Fit NV is 1.08 times less risky than CM NV. It trades about -0.05 of its potential returns per unit of risk. CM NV is currently generating about -0.15 per unit of risk. If you would invest  2,230  in Basic Fit NV on September 20, 2024 and sell it today you would lose (136.00) from holding Basic Fit NV or give up 6.1% of portfolio value over 90 days.

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

Basic Fit NV  vs.  CM NV

Basic Fit NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Basic Fit NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Basic Fit is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

CM NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CM NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Basic Fit and CM NV

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

The idea behind Basic Fit NV and CM NV 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.