Correlation Between CI Financial and Diamond Estates

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

By analyzing existing cross correlation between CI Financial Corp and Diamond Estates Wines, you can compare the effects of market volatilities on CI Financial and Diamond Estates 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 CI Financial with a short position of Diamond Estates. Check out your portfolio center. Please also check ongoing floating volatility patterns of CI Financial and Diamond Estates.

Diversification Opportunities for CI Financial and Diamond Estates

-0.89

Correlation Coefficient

CI Financial  Diamond Estates

Pay attention - limited upside

The 3 months correlation between CIX and Diamond is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding CI Financial Corp and Diamond Estates Wines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Estates Wines and CI 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 CI Financial Corp are associated (or correlated) with Diamond Estates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Estates Wines has no effect on the direction of CI Financial i.e., CI Financial and Diamond Estates go up and down completely randomly.

Pair Corralation between CI Financial and Diamond Estates

Assuming the 90 days trading horizon CI Financial Corp is expected to generate 0.83 times more return on investment than Diamond Estates. However, CI Financial Corp is 1.2 times less risky than Diamond Estates. It trades about 0.24 of its potential returns per unit of risk. Diamond Estates Wines is currently generating about -0.17 per unit of risk. If you would invest  1,789  in CI Financial Corp on September 25, 2024 and sell it today you would earn a total of  1,300  from holding CI Financial Corp or generate 72.67% return on investment over 90 days.

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

CI Financial Corp  vs.  Diamond Estates Wines

CI Financial Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CI Financial Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, CI Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Diamond Estates Wines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diamond Estates Wines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with CI Financial and Diamond Estates

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

The idea behind CI Financial Corp and Diamond Estates Wines 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.