Correlation Between CIM FINANCIAL and AFREXIMBANK

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

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

Diversification Opportunities for CIM FINANCIAL and AFREXIMBANK

-0.66

Correlation Coefficient

CIM FINANCIAL  AFREXIMBANK

Excellent diversification

The 3 months correlation between CIM and AFREXIMBANK is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding CIM FINANCIAL SERVICES and AFREXIMBANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AFREXIMBANK and CIM FINANCIAL 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 CIM FINANCIAL SERVICES are associated (or correlated) with AFREXIMBANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AFREXIMBANK has no effect on the direction of CIM FINANCIAL i.e., CIM FINANCIAL and AFREXIMBANK go up and down completely randomly.

Pair Corralation between CIM FINANCIAL and AFREXIMBANK

Assuming the 90 days trading horizon CIM FINANCIAL SERVICES is expected to generate 15.46 times more return on investment than AFREXIMBANK. However, CIM FINANCIAL is 15.46 times more volatile than AFREXIMBANK. It trades about 0.12 of its potential returns per unit of risk. AFREXIMBANK is currently generating about -0.07 per unit of risk. If you would invest  1,100  in CIM FINANCIAL SERVICES on September 5, 2024 and sell it today you would earn a total of  100.00  from holding CIM FINANCIAL SERVICES or generate 9.09% return on investment over 90 days.

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

CIM FINANCIAL SERVICES  vs.  AFREXIMBANK

CIM FINANCIAL SERVICES

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CIM FINANCIAL SERVICES are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady primary indicators, CIM FINANCIAL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AFREXIMBANK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AFREXIMBANK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, AFREXIMBANK is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CIM FINANCIAL and AFREXIMBANK

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

The idea behind CIM FINANCIAL SERVICES and AFREXIMBANK 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.