Correlation Between C1MI34 and Recrusul

Can any of the company-specific risk be diversified away by investing in both C1MI34 and Recrusul 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 C1MI34 and Recrusul into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between C1MI34 and Recrusul SA, you can compare the effects of market volatilities on C1MI34 and Recrusul 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 C1MI34 with a short position of Recrusul. Check out your portfolio center. Please also check ongoing floating volatility patterns of C1MI34 and Recrusul.

Diversification Opportunities for C1MI34 and Recrusul

0.17

Correlation Coefficient

C1MI34  Recrusul

Average diversification

The 3 months correlation between C1MI34 and Recrusul is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding C1MI34 and Recrusul SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Recrusul SA and C1MI34 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 C1MI34 are associated (or correlated) with Recrusul. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Recrusul SA has no effect on the direction of C1MI34 i.e., C1MI34 and Recrusul go up and down completely randomly.

Pair Corralation between C1MI34 and Recrusul

Assuming the 90 days trading horizon C1MI34 is expected to generate 4.68 times less return on investment than Recrusul. But when comparing it to its historical volatility, C1MI34 is 10.13 times less risky than Recrusul. It trades about 0.07 of its potential returns per unit of risk. Recrusul SA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,480  in Recrusul SA on September 23, 2024 and sell it today you would lose (1,941) from holding Recrusul SA or give up 78.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.0%
Values	Daily Returns

C1MI34  vs.  Recrusul SA

C1MI34

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in C1MI34 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, C1MI34 sustained solid returns over the last few months and may actually be approaching a breakup point.

Recrusul SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Recrusul SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Recrusul unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with C1MI34 and Recrusul

The main advantage of trading using opposite C1MI34 and Recrusul positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if C1MI34 position performs unexpectedly, Recrusul 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 Recrusul will offset losses from the drop in Recrusul's long position.

The idea behind C1MI34 and Recrusul SA 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.